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Comment on IASB ED/2017/4 Proceeds before Intended Use by Accounting Standards Committee of Germany

Analyzing current accounting issues and communicating theoretical understanding to professional colleagues and clients.

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Added on  2023-06-15

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The Accounting Standards Committee of Germany (ASCG) comments on IASB ED/2017/4 Proceeds before Intended Use, expressing doubts about the proposed amendment and suggesting clarifications. They argue that the deletion of the principle in IAS 16.17(e) may have unintended consequences and propose clarifying the meaning of 'testing', defining the nature of items produced from testing, and establishing a robust principle for deducting sales proceeds from testing. They prefer retaining the deductibility of sales proceeds from costs of testing.

Comment on IASB ED/2017/4 Proceeds before Intended Use by Accounting Standards Committee of Germany

Analyzing current accounting issues and communicating theoretical understanding to professional colleagues and clients.

   Added on 2023-06-15

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Contact: Bank Details: Register of Associations:
Zimmerstr. 30 .D-10969 Berlin . Deutsche Bank Berlin District Court Berlin-Charlottenburg, VR 18526 Nz
Phone: +49 (0)30 206412-0 . Account. 0 700 781 00, BLZ 100 700 00 Executive Committee:
Fax: +49 (0)30 206412-15 IBAN-Nr. DE26 1007 0000 0070 0781 00 Prof. Dr. Andreas Barckow (President)
E-Mail: info@drsc.de BIC (Swift-Code) DEUTDEBBXXX Peter Missler (Vice-President)
Deutsches Rechnungslegungs Standards Committee e.V.
Accounting Standards Committee of Germany
DRSC
DRSC e. V. • Zimmerstr. 30 • 10969 Berlin
Mr Hans Hoogervorst
Chairman of the
International Accounting Standards Board
30 Cannon Street
London EC4M 6XH
United Kingdom
Dear Hans,
IASB ED/2017/4 Proceeds before Intended Use (Proposed Amendments to IAS 16)
On behalf of the Accounting Standards Committee of Germany (ASCG) I am writing to comment
on the IASB’s ED/2017/4 Proceeds before Intended Use (herein referred to as the ‘ED’). We ap-
preciate the opportunity to comment on this ED.
We are not convinced that the IASB’s proposed amendment represents the best way in dealing
with what appears to be a specific issue in specific industries – e.g. mining, commodities. These
industries typically incur significant proceeds from selling items or material before the intended
use of a production facility (“the item of PPE”) and, in particular, while testing it. Further, there is a
high probability that the proceeds could (and in many cases do) exceed the costs of testing. For
instance, a company operating a gold mine might carve bigger or smaller traces of gold out of the
stone while preparing the shaft for its intended use. Whilst we agree that a clarification of whether
or not the current accounting treatment is appropriate in those circumstances is needed, we have
significant doubts as to a general deletion of the (established) principle in IAS 16.17(e) under
which certain sales proceeds are deducted from the costs to be capitalised. We therefore agree
with the dissenting board member’s opinion. In this context, we also flag that IAS 23.12 consti-
tutes a corresponding principle of deducting income from costs by requiring (or allowing) invest-
ment income to be deducted from borrowing costs.
Having said this, we acknowledge that maintaining the current requirement in IAS 16.17(e) would
not solve the specific issue mentioned above. We believe that more work on clarifying several
aspects and terms is needed:
• Firstly, we agree that the meaning of “testing” requires clarification.
IFRS Technical Committee
Phone: +49 (0)30 206412-12
E-Mail: info@drsc.de
Berlin, 21. August 2017
Comment on IASB ED/2017/4 Proceeds before Intended Use by Accounting Standards Committee of Germany_1

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