Exposure Draft ED/2017/4: Property, Plant and Equipment—Proceeds before Intended Use

IFRS® Standards Exposure Draft ED/2017/4June 2017 Comments to be received by 19 October 2017Property, Plant and Equipment—Proceeds before Intended UseProposed amendments to IAS 16

Property, Plant and Equipment—
Proceeds before Intended Use
(Proposed amendments to IAS 16)
Comments to be received by 19 October 2017

Exposure Draft ED/2017/4 Property, Plant and Equipment—Proceeds before Intended Use (Proposed amendments
to IAS 16) is published by the International Accounting Standards Board (Board) for comment only. The
proposals may be modified in the light of the comments received before being issued in final form.
Comments need to be received by 19 October 2017 and should be submitted in writing to the address
below, by email to [e-mail] or electronically using our ‘Open for comment’ page at:
http://ifrs.org/projects/open-for-comment/.
All comments will be on the public record and posted on our website at www.ifrs.org unless the
respondent requests confidentiality. Such requests will not normally be granted unless supported by a
good reason, for example, commercial confidence. Please see our website for details on this and how we
use your Personal Data.
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ISBN: 978-1-911040-63-7
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CONTENTS
from page
INTRODUCTION 4
INVITATION TO COMMENT 4
[DRAFT] AMENDMENTS TO IAS 16 PROPERTY, PLANT AND EQUIPMENT 6
[DRAFT] AMENDMENTS TO OTHER STANDARDS 8
APPROVAL BY THE BOARD OF EXPOSURE DRAFT PROPERTY, PLANT AND
EQUIPMENT—PROCEEDS BEFORE INTENDED USE PUBLISHED IN
JUNE 2017 9
BASIS FOR CONCLUSIONS ON THE EXPOSURE DRAFT PROPERTY, PLANT
AND EQUIPMENT—PROCEEDS BEFORE INTENDED USE 10
ALTERNATIVE VIEW 17
PROPERTY, PLANT AND EQUIPMENT—PROCEEDS BEFORE INTENDED USE (PROPOSED AMENDMENTS TO IAS 16)
 IFRS Foundation3

Introduction
In this Exposure Draft, the International Accounting Standards Board (Board) proposes to
amend IAS 16 Property, Plant and Equipment. The amendments would 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 those sales proceeds in profit or loss.
Background
Paragraph 17 of IAS 16 specifies examples of costs directly attributable to bringing an item
of property, plant and equipment to the location and condition necessary for it to be
capable of operating in the manner intended by management. One such example is the
costs of testing. Paragraph 17(e) of IAS 16 states that the cost of an item of property, plant
and equipment includes the costs of testing whether the asset is functioning properly, after
deducting the net proceeds from selling any items produced while bringing the asset to that
location and condition.
The IFRS Interpretations Committee (Committee) received a request asking two questions
about paragraph 17(e) of IAS 16:
(a) whether the proceeds referred to in that paragraph relate only to items produced
from testing; and
(b) whether an entity deducts from the cost of an item of property, plant and
equipment any proceeds that exceed the costs of testing.
When discussing the issue, the Committee identified a number of related questions about
the cost of property, plant and equipment. After exploring different approaches, the
Committee recommended that the Board propose an amendment to IAS 16 to prohibit
deducting sales proceeds from the cost of an item of property, plant and equipment. The
Board agreed with the Committee’s recommendations.
Invitation to comment
The Board invites comments on the proposals in this Exposure Draft, particularly on the
questions set out below. Comments are most helpful if they:
(a) comment on the question as stated;
(b) indicate the specific paragraph(s) to which they relate;
(c) contain a clear rationale;
(d) identify any wording in the proposals that is difficult to translate; and
(e) include any alternative the Board should consider.
The Board is not requesting comments on matters that are not considered in this Exposure
Draft.
EXPOSURE D RAFT—JUNE 2017
 IFRS Foundation 4

Comments should be submitted in writing so as to be received no later than 19 October
2017.
Question for respondents
The Board is proposing 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 costs of producing those items, in profit
or loss.
Do you agree with the Board’s proposal? Why or why not? If not, what alternative would
you propose, and why?
How to comment
Comments should be submitted using one of the following methods.
Electronically
(our preferred method)
Visit the ‘Open for comment’ page, which can be found at:
http://ifrs.org/projects/open-for-comment/
Email Email comments can be sent to: [e-mail]
Postal IFRS Foundation
30 Cannon Street
London EC4M 6XH
United Kingdom
All comments will be on the public record and posted on our website at www.ifrs.org unless
the respondent requests confidentiality. Such requests will not normally be granted unless
supported by a good reason, for example, commercial confidence. Please see our website for
details on this and how we use your personal data.
PROPERTY, PLANT AND EQUIPMENT—PROCEEDS BEFORE INTENDED USE (PROPOSED AMENDMENTS TO IAS 16)
 IFRS Foundation5