Property, Plant and Equipment: Proceeds before Intended Use (Amend IAS 16)

Current Status Next Steps

IASB and AcSB are deliberating comments on their Exposure Drafts.

To be determined.

BACKGROUND

The Accounting Standards Board (AcSB) is participating in the International Accounting Standards Board’s (IASB) project to amend IAS 16 Property, Plant and Equipment.

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The objective of this project is to reduce the diversity in application of IAS 16 by prohibiting the deduction from the cost of an item of property, plant and equipment any proceeds from selling items produced before the asset is available for use. Instead, the entity would recognize the proceeds from selling such items, and related production costs, in profit or loss.

The AcSB’s due process includes ensuring that Canadian entities’ financial reporting needs are considered by the IASB and issuing the AcSB’s own exposure draft on each IASB proposal. Subject to the responses to the AcSB’s exposure draft on whether the IASB’s proposals are appropriate for application in Canada, the AcSB expects that the amendments will be incorporated into Canadian GAAP in accordance with the AcSB’s strategy of adopting IFRS® Standards for publicly accountable enterprises.

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PROJECT NEWS & DECISION SUMMARIES

AcSB Response – Property, Plant and Equipment—Proceeds before Intended Use (Proposed amendments to IAS 16)
On October 19, 2017, the AcSB submitted a comment letter responding to the IASB’s Exposure Draft issued in June 2017. The letter disagrees with the proposal because it would not provide entities with sufficient guidance to determine the costs related to the selling items produced before an asset is available for use. Several concerns are raised, including how the resulting profit margin may not be a meaningful measure for users to predict future profitability and cash flows. The AcSB strongly encourages the IASB to consider further developing this proposal in order to provide relevant information to users. Read the AcSB letter posted by the IASB.

AcSB Exposure Draft – Property, Plant and Equipment—Proceeds before Intended Use (Proposed amendments to IAS 16)
July 13, 2017. The AcSB has issued its Exposure Draft that corresponds to the IASB’s Exposure Draft on this topic. Stakeholders are encouraged to submit their comments by October 19, 2017.

IASB Exposure Draft – Property, Plant and Equipment—Proceeds before Intended Use (Proposed amendments to IAS 16)
June 26, 2017. The IASB has issued an Exposure Draft proposing amendments to IAS 16 Property, Plant and Equipment. Canadian stakeholders are encouraged to submit their comments to the IASB by October 19, 2017.

 

Disclaimer: This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal ballot process.