Paragraphs 60 and 62 in IAS 16 and paragraphs 97 and 98 of IAS 38 allow a number of depreciation and amortisation methods.
The objective of the proposed amendment is to clarify that a depreciation/amortisation method that reflects a pattern of generation economic benefits from the asset rather than a pattern of consumption of the asset’s economic benefits is not an appropriate method of depreciation/amortisation.
The IASB proposes a clarification to paragraph 62 of IAS 16 and paragraph 98 of IAS 38 to state that a method of depreciation/amortisation that is based on the revenue expected to be generated from the use of an asset in an entity’s business is not an appropriate method.
At the October 2012 meeting the IASB proposed the Exposure Draft to be exposed for at least 120 days. The reason for proposing a longer comment period is that one particular industry sector thinks that the proposed amendments to IAS 16 and IAS 38 relating to revenue-based depreciation could have an industry-wide impact. Consequently, the IASB proposed a longer comment period to allow more time for those affected to assess the extent of the impact and for us to undertake outreach to them.