IASB Revised Amendments to IAS 16 and IAS 38

In December 2012, the IASB published for comment the Exposure Draft ED/2012/5 Clarification of Acceptable Methods of Depreciation and Amortisation (proposed amendments to IAS 16 and IAS 38). This Exposure Draft stated that a method that uses revenue generated from an activity that includes the use of an asset is not an appropriate depreciation / amortisation method.

Keywords: Mazars, Thailand, Accounting, IFRS, IASB, IAS 16, IAS 38

18 March 2014

One of the main points of debate following the publication of the Exposure Draft was to determine whether there could be limited circumstances in which a revenue based depreciation / amortization method would be appropriate (since revenue based methods are commonly used in some industries – for instance, they are commonly used in the media industry to determine the amortisation of expenses for film or TV program rights).

At the November 2013 meeting, the IASB decided to proceed with the proposed amendments subject to some wording changes. These proposed amendments to IAS 16 and IAS 38 would in particular add a rebuttable presumption to IAS 38 that revenue is presumed to be an inappropriate basis for measuring depreciation expense, unless either it can be demonstrated that there is a strong correlation between revenue and the consumption of the asset or there is an unusual circumstance in which the intangible right is expressed as a measure of revenue.