Deloitte comment letter on tentative agenda decision on IAS 17 — Meaning of ‘incremental costs’

Published on: 21 Jan 2014

We have commented on the IFRS Interpretations Committee tentative decision not to take onto the Committee’s agenda a request for clarification on whether the salary costs of permanent staff involved in negotiating and arranging new leases (and loans) qualify as ‘incremental costs’ within the context of IAS 17 for inclusion as initial direct costs in the initial measurement of a finance lease receivable.

We agree with the IFRS Interpretations Committee’s decision not to add this item onto its agenda for the reasons set out in the tentative agenda decision, but note that the statement that  “only costs that would not have been incurred if the entity had not negotiated and arranged a lease” is drawn from the definition of transaction costs included in IAS 39 Financial Instruments: Recognition and Measurement (and, by cross-reference, in IFRS 9 Financial Instruments). We believe the tentative agenda decision could be made clearer by referring to this definition and stating that the term ‘incremental costs’ is expected to be applied consistently in the context of finance lease receivables and other financial assets.

Download the full comment letter below.


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