EFRAG published its final comment letter to the IASB on its ED Clarification of Acceptable Methods of Depreciation and Amortisation (Proposed Amendments to IAS 16 and IAS 38).
In December 2012, the IASB published an ED where it proposed to clarify that when applying the guidance in paragraph 62 of IAS 16 and paragraph 98 of IAS 38, a revenue-based method should not be used to calculate the charge for depreciation and/or amortisation, because that method reflects a pattern of economic benefits being generated from the asset, rather than the expected pattern of consumption of the future economic benefits embodied in the asset. The proposed amendment also provides some further guidance in the application of the diminishing balance method.
In its final comment letter, EFRAG supports the IASB’s efforts to clarify the current requirements regarding the use of revenue-based methods of depreciation and amortisation.
However, EFRAG believes that the IASB should remove any language from the ED that discourages entities from applying revenue-based methods when they represent an appropriate proxy for reflecting the depreciation of the asset through its use.
Press release
Final comment letter
© EFRAG - European Financial Reporting Advisory Group
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