Background

The issue was initially raised with the IFRS Interpretations Committee that had origianally intended to develop an interpretation of IAS 16 Property, Plant and Equipment to deal with it. However, during the course of discussions the Committee concluded that a narrow-scope amendment to IAS 16 would be a better solution.

Suggested changes

ED/2017/4 Property, Plant and Equipment — Proceeds before Intended Use (Proposed amendments to IAS 16) proposes to amend IAS 16 to prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity would recognise the proceeds from selling such items, and the cost of producing those items, in profit or loss.

Effective date

The exposure draft does not contain a proposed effective date which the IASB intends to decide on after the exposure. Nevertheless, the IASB has already concluded that earlier application would be permitted.

Additional information

Please click for:

• IASB press release (link to IASB website)
• Access to the exposure draft on the IASB website
• IFRS in Focus newsletter explaining the amendments
• Our IAS Plus project page on IAS 16 — Proceeds before intended use