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 17 – Meaning of 'incremental costs'

Date recorded:

This paper summarises comments received on the tentative agenda decision not to add this issue to the Interpretations Committee’s agenda, and provides proposed wording for the final agenda decision.

Most Committee members who commented noted that they agreed with the staff recommendation that the Committee should not take this issue onto its agenda, but commented on the proposed wording in the final agenda decision.

Several Committee members commented on the first two sentences in the penultimate paragraph of the final agenda decision, noting that there should be references to the accounting literature that formed the basis for the statements the Committee was making in these sentences.   

Several other Committee members highlighted a disconnect between the results of the outreach performed on the leasing project and some comments received on the tentative agenda decision which indicated that there was diversity in practice.

Another Committee member suggested that the Committee should state that the reasons for not taking this issue onto its agenda were because a) this was not an urgent issue, and b) the issue would be addressed by the leasing project, rather than getting into whether there was diversity in practice, and whether internal costs would qualify as incremental costs.

Another Committee member also suggested removing the sentence in the final agenda decision that states that the Committee noted that there does not appear to be significant diversity in practice on this issue.  He noted that he was concerned that there may be more diversity in practice than the Committee thought. 

In response to the comment made by the previous Committee member, a further Committee member referred to the fact that a comment letter had been received from a real estate industry participant highlighting the issue of diversity in their industry.

Another Committee member pointed out that the final agenda decision proposed by the staff reflected the conclusions reached by the Committee in the previous discussions on this issue. 

Another Committee member noted that he did not support the recommendation for the Committee not to take this issue onto its agenda.  He noted that this was an interpretive issue, adding that there were people who believe there was no GAAP difference between US GAAP and IAS 17, and those who had adopted a policy of capitalising these costs had generally followed a US GAAP approach on the understanding that US GAAP and IFRS were the same on this issue.

The Chairman of the Committee called a vote.  The overwhelming majority of the Committee members agreed to proceed with the staff recommendation, subject to wording changes to the final agenda decision. 

Two Committee members did not vote in favour of the staff recommendation.

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.