This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

IAS 16 — Disclosure of carrying amount information for assets stated at revalued amounts

Date recorded:

The paper addresses the request received by the IFRS Interpretations Committee inquiring whether an entity is required to reflect the capitalisation of borrowing costs to meet the disclosure requirement in IAS 16 Property, Plant and Equipment paragraph 77(e) for assets stated at revalued amounts for which borrowing costs are not capitalised in accordance with IAS 23 Borrowing Costs paragraph 4(a).  The submitter asserted that the capitalisation of borrowing costs for these assets to meet disclosure requirements is burdensome, and suggested that it should not be a requirement of IAS 16 to disclose these costs.

The staff noted that they think IAS 16 is clear in its requirement in paragraph 77(e) that the carrying amount that would have been recognised under the cost model shall be disclosed for assets carried under the revaluation model. As a result, the disclosure has to reflect the amount that the assets would have been stated at had the cost model been applied and borrowing costs been capitalised.

The staff recommended that in light of the existing requirements in IFRS, and assessment of the Interpretations Committee’s agenda criteria, neither an Interpretation nor an amendment to IFRSs is necessary. Staff therefore recommends that the Interpretations Committee should not take this issue onto its agenda.

Questions to the Committee

  1. Do you agree with the staff recommendation not to add this topic to the Interpretation Committee’s agenda?
  2. Do you agree with the wording of the tentative agenda decision?

The members agreed with the staff’s recommendation not to add this topic to the Interpretation Committee’s agenda, noting that they agreed that the requirements of paragraph 77(e) of IAS 16 are clear, and that the amount to be disclosed in accordance with said paragraph includes borrowing costs capitalised in accordance with IAS 23.

However, several members commented that they disagreed with the staff’s analysis that this is a valuable disclosure that provides comparability to users of financial statements, noting that there is an inherent lack of comparability with historical cost because different assets are purchased at different times, and the comments on usefulness overstate the value of the disclosure.

It was suggested that the wording in the Rejection Notice be amended to remove the reference to comparability.

A member commented that the staff has not addressed the issue raised by the submitter of removing the disclosure requirement.  The staff responded noting that, although they have not explicitly addressed this issue, they received feedback from users commenting that it is a useful disclosure; so they have implicitly dealt with this issue by not proposing to delete the requirement.

Another member commented that they do not believe that property, plant and equipment (‘PPE’) subsequently measured at fair value falls within the exemption in paragraph 4A of IAS 23 because this exemption only applies to assets measured at fair value upon initial recognition.  PPE is measured at cost upon initial recognition, with a choice to measure at fair value subsequent to initial recognition.  Accordingly, given the fact that paragraph 4A of IAS 23 does not apply to PPE, the member suggested that the staff’s wording in the Agenda decision making reference to said paragraph should be removed from the Rejection Notice.

The members agreed with the staff’s recommendation and wording of the tentative agenda decision, subject to the two wording amendments as noted in the discussion above.

Related Topics

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.