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IAS 1 — Presentation of Financial Statements
IAS 2 — Inventories
IAS 7 — Statement of Cash Flows
IAS 8 — Accounting Policies, Changes in Accounting Estimates and Errors
IAS 10 — Events After the Reporting Period
IAS 11 — Construction Contracts
IAS 12 — Income Taxes
IAS 14 — Segment Reporting (Superseded)

IAS 15 — Information Reflecting the Effects of Changing Prices (Withdrawn)
IAS 16 — Property, Plant and Equipment
IAS 17 — Leases
IAS 18 — Revenue
IAS 19 — Employee Benefits (2011)
IAS 19 — Employee Benefits (1998) (superseded)
IAS 20 — Accounting for Government Grants and Disclosure of Government Assistance
IAS 21 — The Effects of Changes in Foreign Exchange Rates
IAS 22 — Business Combinations (Superseded)
IAS 23 — Borrowing Costs
IAS 24 — Related Party Disclosures
IAS 26 — Accounting and Reporting by Retirement Benefit Plans
IAS 27 — Separate Financial Statements (2011)
IAS 27 — Consolidated and Separate Financial Statements (2008)
IAS 28 — Investments in Associates and Joint Ventures (2011)
IAS 28 — Investments in Associates (2003)
IAS 29 — Financial Reporting in Hyperinflationary Economies
IAS 30 — Disclosures in the Financial Statements of Banks and Similar Financial Institutions
IAS 31 — Interests In Joint Ventures
IAS 32 — Financial Instruments: Presentation
IAS 33 — Earnings Per Share
IAS 34 — Interim Financial Reporting
IAS 35 — Discontinuing Operations (Superseded)
IAS 36 — Impairment of Assets
IAS 37 — Provisions, Contingent Liabilities and Contingent Assets

IAS 38 — Intangible Assets
IAS 39 — Financial Instruments: Recognition and Measurement
IAS 40 — Investment Property
IAS 41 — Agriculture
IAS 17 — Leases
Overview
IAS 17 Leases prescribes the accounting policies and disclosures applicable to leases, both for lessees
and lessors. Leases are required to be classified as either finance leases (which transfer substantially all
the risks and rewards of ownership, and give rise to asset and liability recognition by the lessee and a re-
ceivable by the lessor) and operating leases (which result in expense recognition by the lessee, with the
asset remaining recognised by the lessor).
IAS 17 was reissued in December 2003 and applies to annual periods beginning on or after 1 January
2005. IAS 17 will be superseded by IFRS 16 Leases as of 1 January 2019.
History of IAS 17
October 1980 Exposure Draft E19 Accounting for Leases
September 1982 IAS 17 Accounting for Leases
1 January 1984 Effective date of IAS 17 (1982)
1994 IAS 17 (1982) was reformatted
April 1997 Exposure Draft E56, Leases
December 1997IAS 17 Leases
1 January 1999 Effective date of IAS 17 (1997) Leases
18 December 2003 Revised version of IAS 17 issued by the IASB
1 January 2005 Effective date of IAS 17 (Revised 2003)
16 April 2009 IAS 17 amended for Annual Improvements to IFRSs 2009 about classification of land
leases
1 January 2010 Effective date of the April 2009 revisions to IAS 17, with early application permitted
(with disclosure)
1 January 2019 IAS 17 will be superseded by IFRS 16 Leases
Related Interpretations
IFRIC 4 Determining Whether an Arrangement Contains a Lease
SIC-15 Operating Leases – Incentives
SIC-27 Evaluating the Substance of Transactions in the Legal Form of a Lease
Amendments under consideration by the IASB
Leases – Comprehensive project
Summary of IAS 17
Objective of IAS 17
The objective of IAS 17 (1997) is to prescribe, for lessees and lessors, the appropriate accounting policies
and disclosures to apply in relation to finance and operating leases.
Scope
IAS 17 applies to all leases other than lease agreements for minerals, oil, natural gas, and similar regen-
erative resources and licensing agreements for films, videos, plays, manuscripts, patents, copyrights, and
similar items. [IAS 17.2]
However, IAS 17 does not apply as the basis of measurement for the following leased assets: [IAS 17.2]
property held by lessees that is accounted for as investment property for which the lessee uses the fair
value model set out in IAS 40
investment property provided by lessors under operating leases (see IAS 40)
biological assets held by lessees under finance leases (see IAS 41)
biological assets provided by lessors under operating leases (see IAS 41)
Classification of leases
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incident to
ownership. All other leases are classified as operating leases. Classification is made at the inception of
the lease. [IAS 17.4]
Whether a lease is a finance lease or an operating lease depends on the substance of the transaction
rather than the form. Situations that would normally lead to a lease being classified as a finance lease
include the following: [IAS 17.10]
the lease transfers ownership of the asset to the lessee by the end of the lease term
the lessee has the option to purchase the asset at a price which is expected to be sufficiently lower than
fair value at the date the option becomes exercisable that, at the inception of the lease, it is reasonably
certain that the option will be exercised
the lease term is for the major part of the economic life of the asset, even if title is not transferred
at the inception of the lease, the present value of the minimum lease payments amounts to at least sub-
stantially all of the fair value of the leased asset
the lease assets are of a specialised nature such that only the lessee can use them without major modifi-
cations being made
Other situations that might also lead to classification as a finance lease are: [IAS 17.11]
if the lessee is entitled to cancel the lease, the lessor's losses associated with the cancellation are borne
by the lessee
gains or losses from fluctuations in the fair value of the residual fall to the lessee (for example, by means
of a rebate of lease payments)
the lessee has the ability to continue to lease for a secondary period at a rent that is substantially lower
than market rent
When a lease includes both land and buildings elements, an entity assesses the classification of each
element as a finance or an operating lease separately. In determining whether the land element is an
operating or a finance lease, an important consideration is that land normally has an indefinite
economic life [IAS 17.15A]. Whenever necessary in order to classify and account for a lease of land and
buildings, the minimum lease payments (including any lump-sum upfront payments) are allocated
between the land and the buildings elements in proportion to the relative fair values of the leasehold
interests in the land element and buildings element of the lease at the inception of the lease. [IAS 17.16]
For a lease of land and buildings in which the amount that would initially be recognised for the land
element is immaterial, the land and buildings may be treated as a single unit for the purpose of lease
classification and classified as a finance or operating lease. [IAS 17.17] However, separate measurement
of the land and buildings elements is not required if the lessee's interest in both land and buildings is
classified as an investment property in accordance with IAS 40 and the fair value model is adopted. [IAS
17.18]
Accounting by lessees
The following principles should be applied in the financial statements of lessees:
at commencement of the lease term, finance leases should be recorded as an asset and a liability at the
lower of the fair value of the asset and the present value of the minimum lease payments (discounted at
the interest rate implicit in the lease, if practicable, or else at the entity's incremental borrowing rate)
[IAS 17.20]
finance lease payments should be apportioned between the finance charge and the reduction of the
outstanding liability (the finance charge to be allocated so as to produce a constant periodic rate of
interest on the remaining balance of the liability) [IAS 17.25]
the depreciation policy for assets held under finance leases should be consistent with that for owned
assets. If there is no reasonable certainty that the lessee will obtain ownership at the end of the lease –
the asset should be depreciated over the shorter of the lease term or the life of the asset [IAS 17.27]
for operating leases, the lease payments should be recognised as an expense in the income statement
over the lease term on a straight-line basis, unless another systematic basis is more representative of
the time pattern of the user's benefit [IAS 17.33]
Incentives for the agreement of a new or renewed operating lease should be recognised by the lessee as
a reduction of the rental expense over the lease term, irrespective of the incentive's nature or form, or
the timing of payments. [SIC-15]
Accounting by lessors
The following principles should be applied in the financial statements of lessors:
at commencement of the lease term, the lessor should record a finance lease in the balance sheet as a
receivable, at an amount equal to the net investment in the lease [IAS 17.36]
the lessor should recognise finance income based on a pattern reflecting a constant periodic rate of
return on the lessor's net investment outstanding in respect of the finance lease [IAS 17.39]
assets held for operating leases should be presented in the balance sheet of the lessor according to the
nature of the asset. [IAS 17.49] Lease income should be recognised over the lease term on a straight-line
basis, unless another systematic basis is more representative of the time pattern in which use benefit is
derived from the leased asset is diminished [IAS 17.50]
Incentives for the agreement of a new or renewed operating lease should be recognised by the lessor as
a reduction of the rental income over the lease term, irrespective of the incentive's nature or form, or
the timing of payments. [SIC-15]
Manufacturers or dealer lessors should include selling profit or loss in the same period as they would for
an outright sale. If artificially low rates of interest are charged, selling profit should be restricted to that
which would apply if a commercial rate of interest were charged. [IAS 17.42]
Under the 2003 revisions to IAS 17, initial direct and incremental costs incurred by lessors in negotiating
leases must be recognised over the lease term. They may no longer be charged to expense when
incurred. This treatment does not apply to manufacturer or dealer lessors where such cost recognition is
as an expense when the selling profit is recognised.
Sale and leaseback transactions
For a sale and leaseback transaction that results in a finance lease, any excess of proceeds over the
carrying amount is deferred and amortised over the lease term. [IAS 17.59]
For a transaction that results in an operating lease: [IAS 17.61]
if the transaction is clearly carried out at fair value - the profit or loss should be recognised immediately
if the sale price is below fair value - profit or loss should be recognised immediately, except if a loss is
compensated for by future rentals at below market price, the loss should be amortised over the period
of use
if the sale price is above fair value - the excess over fair value should be deferred and amortised over the
period of use
if the fair value at the time of the transaction is less than the carrying amount – a loss equal to the differ-
ence should be recognised immediately [IAS 17.63]
Disclosure: lessees – finance leases [IAS 17.31]
carrying amount of asset
reconciliation between total minimum lease payments and their present value
amounts of minimum lease payments at balance sheet date and the present value thereof, for:
the next year
years 2 through 5 combined
beyond five years
contingent rent recognised as an expense
total future minimum sublease income under noncancellable subleases
general description of significant leasing arrangements, including contingent rent provisions, renewal or
purchase options, and restrictions imposed on dividends, borrowings, or further leasing
Disclosure: lessees – operating leases [IAS 17.35]
amounts of minimum lease payments at balance sheet date under noncancellable operating leases for:
the next year
beyond five years
total future minimum sublease income under noncancellable subleases
lease and sublease payments recognised in income for the period
contingent rent recognised as an expense
general description of significant leasing arrangements, including contingent rent provisions, renewal or
purchase options, and restrictions imposed on dividends, borrowings, or further leasing
Disclosure: lessors – finance leases [IAS 17.47]
reconciliation between gross investment in the lease and the present value of minimum lease payments;
gross investment and present value of minimum lease payments receivable for:
the next year

beyond five years
unearned finance income
unguaranteed residual values
accumulated allowance for uncollectible lease payments receivable
contingent rent recognised in income
general description of significant leasing arrangements
Disclosure: lessors – operating leases [IAS 17.56]
amounts of minimum lease payments at balance sheet date under noncancellable operating leases in
the aggregate and for:
the next year
beyond five years
contingent rent recognised as in income
general description of significant leasing arrangements
Related news
ESMA publishes 20th enforcement decisions report
05 Jan 2017
EFRAG, EFFAS and ABAF/BVFA joint investor outreach on leases
20 May 2016
IASB posts webcast featuring Sue Lloyd on IFRS 16 exemptions
03 May 2016
IASB webcast on the definition of a lease now available
13 Apr 2016
IASB issues new leasing standard
13 Jan 2016
IASB staff publishes update on the leases project
24 Feb 2015
All Related
Related Publications
IFRS industry insights: Property occupiers — Implications of the new leasing standard Image
IFRS industry insights: Property occupiers — Implications of the new leasing standard
15 Jan 2016
IFRS industry insights: Aviation sector — Implications of the new leasing standard Image
IFRS industry insights: Aviation sector — Implications of the new leasing standard
15 Jan 2016
IFRS in Focus — IASB issues IFRS 16 – Leases Image
IFRS in Focus — IASB issues IFRS 16 – Leases
13 Jan 2016
Leases — IASB Completes Redeliberations Image
Leases — IASB completes redeliberations
23 Oct 2015
All Related
IFRIC 4 — Determining Whether an Arrangement Contains a Lease
SIC-15 — Operating Leases – Incentives
SIC-27 — Evaluating the Substance of Transactions in the Legal Form of a Lease
All Related
Related Projects
Annual improvements — 2007-2009 cycle
IAS 17 – Determining whether an arrangement contains a lease
IAS 17 – Sales and leasebacks with repurchase rights
Improvements to existing International Accounting Standards (2001-2003)
Leases (IFRS 16)
All Related
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IAS 17 — Leases
IAS 18 — Revenue


Overview
IAS 16 Property, Plant and Equipment outlines the accounting treatment for most types of property,
plant and equipment. Property, plant and equipment is initially measured at its cost, subsequently
measured either using a cost or revaluation model, and depreciated so that its depreciable amount is
allocated on a systematic basis over its useful life.
IAS 16 was reissued in December 2003 and applies to annual periods beginning on or after 1 January
2005.
History of IAS 16
Date Development Comments
August 1980 Exposure Draft E18 Accounting for Property, Plant and Equipment in the Context of the
Historical Cost System published
March 1982 IAS 16 Accounting for Property, Plant and Equipment issued Operative for financial
statements covering periods beginning on or after 1 January 1983
1 January 1992 Exposure Draft E43 Property, Plant and Equipment published
December 1993IAS 16 Property, Plant and Equipment issued
(revised as part of the 'Comparability of Financial Statements' project) Operative for financial state-
ments covering periods beginning on or after 1 January 1995
April and July 1998 Amended to be consistent with IAS 22, IAS 36 and IAS 37 Operative for
annual financial statements covering periods beginning on or after 1 July 1999
18 December 2003 IAS 16 Property, Plant and Equipment issued Effective for annual periods
beginning on or after 1 January 2005
22 May 2008 Amended by Improvements to IFRSs (routine sales of assets held for rental)
Effective for annual periods beginning on or after 1 January 2009
17 May 2012 Amended by Annual Improvements 2009-2011 Cycle (classification of servicing

equipment) Effective for annual periods beginning on or after 1 January 2013
12 December 2013 Amended by Annual Improvements to IFRSs 2010–2012 Cycle (proportionate re-
statement of accumulated depreciation under the revaluation method) Effective for annual periods
beginning on or after 1 July 2014
12 May 2014 Amended by Clarification of Acceptable Methods of Depreciation and Amortisation
(Amendments to IAS 16 and IAS 38) Effective for annual periods beginning on or after 1 January
2016
30 June 2014 Amended by Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41)
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine
SIC-6 Costs of Modifying Existing Software. SIC-6 was superseded by and incorporated into IAS 16
(2003).
SIC-14 Property, Plant and Equipment – Compensation for the Impairment or Loss of Items. SIC-14 was
superseded by and incorporated into IAS 16 (2003).
SIC-23 Property, Plant and Equipment - Major Inspection or Overhaul Costs. SIC-23 was superseded by
and incorporated into IAS 16 (2003).
IAS 16 — Proceeds before intended use
Summary of IAS 16
Objective of IAS 16
The objective of IAS 16 is to prescribe the accounting treatment for property, plant, and equipment. The
principal issues are the recognition of assets, the determination of their carrying amounts, and the de-
preciation charges and impairment losses to be recognised in relation to them.
Scope
IAS 16 applies to the accounting for property, plant and equipment, except where another standard
requires or permits differing accounting treatments, for example:
assets classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discon-
tinued Operations
biological assets related to agricultural activity accounted for under IAS 41 Agriculture
exploration and evaluation assets recognised in accordance with IFRS 6 Exploration for and Evaluation of
Mineral Resources
mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative resources.
The standard does apply to property, plant, and equipment used to develop or maintain the last three
categories of assets. [IAS 16.3]
The cost model in IAS 16 also applies to investment property accounted for using the cost model under
IAS 40 Investment Property. [IAS 16.5]
The standard does apply to bearer plants but it does not apply to the produce on bearer plants. [IAS
16.3]
Note: Bearer plants were brought into the scope of IAS 16 by Agriculture: Bearer Plants (Amendments to
IAS 16 and IAS 41), which applies to annual periods beginning on or after 1 January 2016.
Recognition
Items of property, plant, and equipment should be recognised as assets when it is probable that: [IAS
16.7]
it is probable that the future economic benefits associated with the asset will flow to the entity, and
the cost of the asset can be measured reliably.
This recognition principle is applied to all property, plant, and equipment costs at the time they are
incurred. These costs include costs incurred initially to acquire or construct an item of property, plant
and equipment and costs incurred subsequently to add to, replace part of, or service it.
IAS 16 does not prescribe the unit of measure for recognition – what constitutes an item of property,
plant, and equipment. [IAS 16.9] Note, however, that if the cost model is used (see below) each part of
an item of property, plant, and equipment with a cost that is significant in relation to the total cost of
the item must be depreciated separately. [IAS 16.43]
IAS 16 recognises that parts of some items of property, plant, and equipment may require replacement
at regular intervals. The carrying amount of an item of property, plant, and equipment will include the
cost of replacing the part of such an item when that cost is incurred if the recognition criteria (future
benefits and measurement reliability) are met. The carrying amount of those parts that are replaced is
derecognised in accordance with the derecognition provisions of IAS 16.67-72. [IAS 16.13]
Also, continued operation of an item of property, plant, and equipment (for example, an aircraft) may
require regular major inspections for faults regardless of whether parts of the item are replaced. When
each major inspection is performed, its cost is recognised in the carrying amount of the item of
property, plant, and equipment as a replacement if the recognition criteria are satisfied. If necessary,
the estimated cost of a future similar inspection may be used as an indication of what the cost of the
existing inspection component was when the item was acquired or constructed. [IAS 16.14]
Initial measurement
An item of property, plant and equipment should initially be recorded at cost. [IAS 16.15] Cost includes
all costs necessary to bring the asset to working condition for its intended use. This would include not
only its original purchase price but also costs of site preparation, delivery and handling, installation,
related professional fees for architects and engineers, and the estimated cost of dismantling and
removing the asset and restoring the site (see IAS 37 Provisions, Contingent Liabilities and Contingent
Assets). [IAS 16.16-17]
If payment for an item of property, plant, and equipment is deferred, interest at a market rate must be
recognised or imputed. [IAS 16.23]
If an asset is acquired in exchange for another asset (whether similar or dissimilar in nature), the cost
will be measured at the fair value unless (a) the exchange transaction lacks commercial substance or (b)
the fair value of neither the asset received nor the asset given up is reliably measurable. If the acquired
item is not measured at fair value, its cost is measured at the carrying amount of the asset given up. [IAS
16.24]
Measurement subsequent to initial recognition
IAS 16 permits two accounting models:
Cost model. The asset is carried at cost less accumulated depreciation and impairment. [IAS 16.30]
Revaluation model. The asset is carried at a revalued amount, being its fair value at the date of revalua-
tion less subsequent depreciation and impairment, provided that fair value can be measured reliably.
[IAS 16.31]
The revaluation model
Under the revaluation model, revaluations should be carried out regularly, so that the carrying amount
of an asset does not differ materially from its fair value at the balance sheet date. [IAS 16.31]
If an item is revalued, the entire class of assets to which that asset belongs should be revalued. [IAS
16.36]
Revalued assets are depreciated in the same way as under the cost model (see below).
If a revaluation results in an increase in value, it should be credited to other comprehensive income and
accumulated in equity under the heading "revaluation surplus" unless it represents the reversal of a
revaluation decrease of the same asset previously recognised as an expense, in which case it should be
recognised in profit or loss. [IAS 16.39]
A decrease arising as a result of a revaluation should be recognised as an expense to the extent that it
exceeds any amount previously credited to the revaluation surplus relating to the same asset. [IAS
16.40]
When a revalued asset is disposed of, any revaluation surplus may be transferred directly to retained
earnings, or it may be left in equity under the heading revaluation surplus. The transfer to retained
earnings should not be made through profit or loss. [IAS 16.41]
Depreciation (cost and revaluation models)

For all depreciable assets:
The depreciable amount (cost less residual value) should be allocated on a systematic basis over the
asset's useful life [IAS 16.50].
The residual value and the useful life of an asset should be reviewed at least at each financial year-end
and, if expectations differ from previous estimates, any change is accounted for prospectively as a
change in estimate under IAS 8. [IAS 16.51]
The depreciation method used should reflect the pattern in which the asset's economic benefits are
consumed by the entity [IAS 16.60]; a depreciation method that is based on revenue that is generated
by an activity that includes the use of an asset is not appropriate. [IAS 16.62A]
Note: The clarification regarding the revenue-based depreciation method was introduced by Clarifica-
tion of Acceptable Methods of Depreciation and Amortisation, which applies to annual periods
beginning on or after 1 January 2016.
The depreciation method should be reviewed at least annually and, if the pattern of consumption of
benefits has changed, the depreciation method should be changed prospectively as a change in estimate
under IAS 8. [IAS 16.61] Expected future reductions in selling prices could be indicative of a higher rate
of consumption of the future economic benefits embodied in an asset. [IAS 16.56]
Note: The guidance on expected future reductions in selling prices was introduced by Clarification of Ac-
ceptable Methods of Depreciation and Amortisation, which applies to annual periods beginning on or
after 1 January 2016.
Depreciation should be charged to profit or loss, unless it is included in the carrying amount of another
asset [IAS 16.48].
Depreciation begins when the asset is available for use and continues until the asset is derecognised,
even if it is idle. [IAS 16.55]
Recoverability of the carrying amount
IAS 16 Property, Plant and Equipment requires impairment testing and, if necessary, recognition for
property, plant, and equipment. An item of property, plant, or equipment shall not be carried at more
than recoverable amount. Recoverable amount is the higher of an asset's fair value less costs to sell and
its value in use.
Any claim for compensation from third parties for impairment is included in profit or loss when the claim
becomes receivable. [IAS 16.65]
Derecognition (retirements and disposals)
An asset should be removed from the statement of financial position on disposal or when it is
withdrawn from use and no future economic benefits are expected from its disposal. The gain or loss on
disposal is the difference between the proceeds and the carrying amount and should be recognised in
profit and loss. [IAS 16.67-71]
If an entity rents some assets and then ceases to rent them, the assets should be transferred to invento-
ries at their carrying amounts as they become held for sale in the ordinary course of business. [IAS
16.68A]
Disclosure
Information about each class of property, plant and equipment
For each class of property, plant, and equipment, disclose: [IAS 16.73]
basis for measuring carrying amount
depreciation method(s) used
useful lives or depreciation rates
gross carrying amount and accumulated depreciation and impairment losses

reconciliation of the carrying amount at the beginning and the end of the period, showing:
additions
disposals
acquisitions through business combinations
revaluation increases or decreases
impairment losses
reversals of impairment losses
depreciation
net foreign exchange differences on translation
other movements
Additional disclosures
The following disclosures are also required: [IAS 16.74]
restrictions on title and items pledged as security for liabilities
expenditures to construct property, plant, and equipment during the period
contractual commitments to acquire property, plant, and equipment
compensation from third parties for items of property, plant, and equipment that were impaired, lost or
given up that is included in profit or loss.
IAS 16 also encourages, but does not require, a number of additional disclosures. [IAS 16.79]
Revalued property, plant and equipment
If property, plant, and equipment is stated at revalued amounts, certain additional disclosures are
required: [IAS 16.77]
the effective date of the revaluation
whether an independent valuer was involved
for each revalued class of property, the carrying amount that would have been recognised had the
assets been carried under the cost model
the revaluation surplus, including changes during the period and any restrictions on the distribution of
the balance to shareholders.
Entities with property, plant and equipment stated at revalued amounts are also required to make dis-
closures under IFRS 13 Fair Value Measurement.
Related news
We comment on the IASB's proposed amendments to IAS 16
29 Sep 2017
EFRAG draft comment letter on proposed amendments to IAS 16
05 Jul 2017
IASB publishes proposed amendments to IAS 16 regarding proceeds before intended use
20 Jun 2017
ESMA publishes 20th enforcement decisions report
05 Jan 2017
IASB updates work plan
18 Nov 2016
We comment on a number of tentative agenda decisions of the IFRS Interpretations Committee
19 Jan 2016
All Related
Deloitte comment letter on the IASB's proposed amendments to IAS 16 Image
Deloitte comment letter on the IASB's proposed amendments to IAS 16
29 Sep 2017
amend-ias-16 Image
IFRS in Focus — IASB proposes to amend IAS 16 in relation to the accounting for proceeds from selling
items produced before an item of property, plant and equipment is available for use
28 Jun 2017
nov-ifric-upd-ias-16 Image
Deloitte comment letter on tentative agenda decision on IAS 16 and IAS 38 — Variable payments for an
asset
19 Jan 2016
3 December Image
EFRAG endorsement status report 3 December 2015
03 Dec 2015
All Related
IFRIC 1 — Changes in Existing Decommissioning, Restoration and Similar Liabilities
IFRIC 12 — Service Concession Arrangements
IFRIC 20 — Stripping Costs in the Production Phase of a Surface Mine
SIC-6 — Costs of Modifying Existing Software
SIC-14 — Property, Plant and Equipment – Compensation for the Impairment or Loss of Items
All Related
Related Projects
IAS 16 — Proceeds before intended use
IAS 16 — Stripping costs in the production phase of a mine
All Related
Related Resources
International Valuation Standards Council (IVSC)
All Related
IAS plus
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IAS 17 — Leases
IAS 18 — Revenue

IAS 18 — Revenue
Overview
IAS 18 Revenue outlines the accounting requirements for when to recognise revenue from the sale of
goods, rendering of services, and for interest, royalties and dividends. Revenue is measured at the fair
value of the consideration received or receivable and recognised when prescribed conditions are met,
which depend on the nature of the revenue.
IAS 18 was reissued in December 1993 and is operative for periods beginning on or after 1 January 1995.
History of IAS 18
April 1981 Exposure Draft E20 Revenue Recognition
December 1982IAS 18 Revenue Recognition
1 January 1984 Effective date of IAS 18 (1982)
May 1992 E41 Revenue Recognition
December 1993IAS 18 Revenue Recognition (revised as part of the 'Comparability of Financial State-
ments' project)
1 January 1995 Effective date of IAS 18 (1993) Revenue Recognition
December 1998Amended by IAS 39 Financial Instruments: Recognition and Measurement, effective 1

January 2001
16 April 2009 Appendix to IAS 18 amended for Annual Improvements to IFRSs 2009. It now provides
guidance for determining whether an entity is acting as a principal or as an agent.
1 January 2018 IAS 18 will be superseded by IFRS 15 Revenue from Contracts with Customers
IFRIC 18 Transfers of Assets from Customers
IFRIC 15 Agreements for the Construction of Real Estate
IFRIC 13 Customer Loyalty Programmes
IFRIC 12 Service Concession Arrangements
SIC-27 Evaluating the Substance of Transactions in the Legal Form of a Lease
SIC-31 Revenue – Barter Transactions Involving Advertising Services

Summary of IAS 18
Objective of IAS 18
The objective of IAS 18 is to prescribe the accounting treatment for revenue arising from certain types of
transactions and events.
Key definition
Revenue: the gross inflow of economic benefits (cash, receivables, other assets) arising from the
ordinary operating activities of an entity (such as sales of goods, sales of services, interest, royalties, and
dividends). [IAS 18.7]
Measurement of revenue
Revenue should be measured at the fair value of the consideration received or receivable. [IAS 18.9] An
exchange for goods or services of a similar nature and value is not regarded as a transaction that
generates revenue. However, exchanges for dissimilar items are regarded as generating revenue. [IAS
18.12]
If the inflow of cash or cash equivalents is deferred, the fair value of the consideration receivable is less
than the nominal amount of cash and cash equivalents to be received, and discounting is appropriate.
This would occur, for instance, if the seller is providing interest-free credit to the buyer or is charging a
below-market rate of interest. Interest must be imputed based on market rates. [IAS 18.11]
Recognition of revenue
Recognition, as defined in the IASB Framework, means incorporating an item that meets the definition
of revenue (above) in the income statement when it meets the following criteria:
it is probable that any future economic benefit associated with the item of revenue will flow to the
entity, and
the amount of revenue can be measured with reliability
IAS 18 provides guidance for recognising the following specific categories of revenue:
Sale of goods
Revenue arising from the sale of goods should be recognised when all of the following criteria have been
satisfied: [IAS 18.14]
the seller has transferred to the buyer the significant risks and rewards of ownership
the seller retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold
the amount of revenue can be measured reliably
it is probable that the economic benefits associated with the transaction will flow to the seller, and
the costs incurred or to be incurred in respect of the transaction can be measured reliably
Rendering of services
For revenue arising from the rendering of services, provided that all of the following criteria are met,
revenue should be recognised by reference to the stage of completion of the transaction at the balance
sheet date (the percentage-of-completion method): [IAS 18.20]
the amount of revenue can be measured reliably;
it is probable that the economic benefits will flow to the seller;
the stage of completion at the balance sheet date can be measured reliably; and
the costs incurred, or to be incurred, in respect of the transaction can be measured reliably.
When the above criteria are not met, revenue arising from the rendering of services should be recog-
nised only to the extent of the expenses recognised that are recoverable (a "cost-recovery approach".
[IAS 18.26]
Interest, royalties, and dividends

For interest, royalties and dividends, provided that it is probable that the economic benefits will flow to
the enterprise and the amount of revenue can be measured reliably, revenue should be recognised as
follows: [IAS 18.29-30]
interest: using the effective interest method as set out in IAS 39
royalties: on an accruals basis in accordance with the substance of the relevant agreement
dividends: when the shareholder's right to receive payment is established
Disclosure [IAS 18.35]
accounting policy for recognising revenue
amount of each of the following types of revenue:
sale of goods
rendering of services
interest
royalties
dividends
within each of the above categories, the amount of revenue from exchanges of goods or services
Implementation guidance
Appendix A to IAS 18 provides illustrative examples of how the above principles apply to certain transac-
tions.
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IAS 17 — Leases
IAS 18 — Revenue

Overview
IAS 19 Employee Benefits (amended 2011) outlines the accounting requirements for employee benefits,
including short-term benefits (e.g. wages and salaries, annual leave), post-employment benefits such as
retirement benefits, other long-term benefits (e.g. long service leave) and termination benefits. The
standard establishes the principle that the cost of providing employee benefits should be recognised in
the period in which the benefit is earned by the employee, rather than when it is paid or payable, and
outlines how each category of employee benefits are measured, providing detailed guidance in particu-
lar about post-employment benefits.
IAS 19 (2011) was issued in 2011, supersedes IAS 19 Employee Benefits (1998), and is applicable to
annual periods beginning on or after 1 January 2013.
History of IAS 19
Date Development Comments
April 1980 Exposure Draft E16 Accounting for Retirement Benefits in Financial Statements of
Employers published
January 1983 IAS 19 Accounting for Retirement Benefits in Financial Statements of Employers issued
Operative for financial statements covering periods beginning on or after 1 January 1985
December 1992E47 Retirement Benefit Costs published
December 1993IAS 19 Retirement Benefit Costs issued Operative for financial statements covering
periods beginning on or after 1 January 1995
October 1996 E54 Employee Benefits published Comment deadline 31 January 1997
February 1998 IAS 19 Employee Benefits issued Operative for financial statements covering
periods beginning on or after 1 January 1999
July 2000 E67 Pension Plan Assets published
October 2000 Amended to change the definition of plan assets and to introduce recognition, measure-
ment and disclosure requirements for reimbursements Operative for annual financial statements
covering periods beginning on or after 1 January 2001
May 2002 Amended to prevent the recognition of gains solely as a result of actuarial losses or past
service cost and the recognition of losses solely as a result of actuarial gains Operative for annual
financial statements covering periods ending on or after 31 May 2002
5 December 2002 ED 2 Share-based Payment published, proposing to replace the equity compen-
sation benefits requirements of IAS 19 Comment deadline 7 March 2003
February 2004 Equity compensation benefits requirements replaced by IFRS 2 Share-based Payment
Effective for annual reporting periods beginning on or after 1 January 2005
29 April 2004 Exposure Draft Proposed Amendments to IAS 19 Employee Benefits: Actuarial Gains and
Losses, Group Plans and Disclosures published Comment deadline 31 July 2004
19 December 2004 Actuarial Gains and Losses, Group Plans and Disclosures issued Effective for
annual periods beginning on or after 1 January 2006
22 May 2008 Amended by Annual Improvements to IFRSs (negative past service costs and curtail-
ments) Effective for annual periods beginning on or after 1 January 2009
20 August 2009 ED/2009/10 Discount Rate for Employee Benefits (Proposed amendments to IAS 19)
published Comment deadline 30 September 2009
(proposals were not finalised)
29 April 2010 ED/2010/3 Defined Benefit Plans (Proposed amendments to IAS 19) published
Comment deadline 6 September 2010
16 June 2011 IAS 19 Employee Benefits (amended 2011) issued Effective for annual periods
beginning on or after 1 January 2013
25 March 2013 ED/2013/4 Defined Benefit Plans: Employee Contributions (Proposed amendments to
IAS 19) published Comment deadline 25 July 2013
21 November 2013 Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) issued
Effective for annual periods beginning on or after 1 July 2014
25 September 2014 Amended by Improvements to IFRSs 2014 (discount rate: regional market issue)
7 February 2018 Plan Amendment, Curtailment or Settlement (Amendments to IAS 19) issued
IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Inter-
action
IAS 19/IFRIC 14 — Remeasurement at a plan amendment, curtailment or settlement / Availability of a

refund of a surplus from a defined benefit plan
Post-employment Benefits — Comprehensive reconsideration of IAS 19 (longer term project)
Summary of IAS 19 (2011)
Amended version of IAS 19 issued in 2011
IAS 19 Employee Benefits (2011) is an amended version of, and supersedes, IAS 19 Employee Benefits
(1998), effective for annual periods beginning on or after 1 January 2013. The summary that follows
refers to IAS 19 (2011). Readers interested in the requirements of IAS 19 Employee Benefits (1998)
should refer to our summary of IAS 19 (1998).
Changes introduced by IAS 19 (2011) as compared to IAS 19 (1998) include:
Introducing a requirement to fully recognise changes in the net defined benefit liability (asset) including
immediate recognition of defined benefit costs, and require disaggregation of the overall defined
benefit cost into components and requiring the recognition of remeasurements in other comprehensive
income (eliminating the 'corridor' approach)
Introducing enhanced disclosures about defined benefit plans

Modifications to the accounting for termination benefits, including distinguishing between benefits
provided in exchange for service and benefits provided in exchange for the termination of employment,
and changing the recognition and measurement of termination benefits
Clarification of miscellaneous issues, including the classification of employee benefits, current estimates
of mortality rates, tax and administration costs and risk-sharing and conditional indexation features
Incorporating other matters submitted to the IFRS Interpretations Committee.
Objective of IAS 19 (2011)
The objective of IAS 19 is to prescribe the accounting and disclosure for employee benefits, requiring an
entity to recognise a liability where an employee has provided service and an expense when the entity
consumes the economic benefits of employee service. [IAS 19(2011).2]
Scope
IAS 19 applies to (among other kinds of employee benefits):
wages and salaries
compensated absences (paid vacation and sick leave)
profit sharing and bonuses
medical and life insurance benefits during employment
non-monetary benefits such as houses, cars, and free or subsidised goods or services
retirement benefits, including pensions and lump sum payments
post-employment medical and life insurance benefits
long-service or sabbatical leave
'jubilee' benefits
deferred compensation programmes
termination benefits.
IAS 19 (2011) does not apply to employee benefits within the scope of IFRS 2 Share-based Payment or
the reporting by employee benefit plans (see IAS 26 Accounting and Reporting by Retirement Benefit
Plans).
Short-term employee benefits
Short-term employee benefits are those expected to be settled wholly before twelve months after the
end of the annual reporting period during which employee services are rendered, but do not include ter-
mination benefits.[IAS 19(2011).8] Examples include wages, salaries, profit-sharing and bonuses and
non-monetary benefits paid to current employees.
The undiscounted amount of the benefits expected to be paid in respect of service rendered by
employees in an accounting period is recognised in that period. [IAS 19(2011).11] The expected cost of
short-term compensated absences is recognised as the employees render service that increases their
entitlement or, in the case of non-accumulating absences, when the absences occur, and includes any
additional amounts an entity expects to pay as a result of unused entitlements at the end of the period.
[IAS 19(2011).13-16]
Profit-sharing and bonus payments
An entity recognises the expected cost of profit-sharing and bonus payments when, and only when, it
has a legal or constructive obligation to make such payments as a result of past events and a reliable
estimate of the expected obligation can be made. [IAS 19.19]
Types of post-employment benefit plans
Post-employment benefit plans are informal or formal arrangements where an entity provides post-em-
ployment benefits to one or more employees, e.g. retirement benefits (pensions or lump sum
payments), life insurance and medical care.
The accounting treatment for a post-employment benefit plan depends on the economic substance of
the plan and results in the plan being classified as either a defined contribution plan or a defined benefit
plan:
Defined contribution plans. Under a defined contribution plan, the entity pays fixed contributions into a
fund but has no legal or constructive obligation to make further payments if the fund does not have suf-
ficient assets to pay all of the employees' entitlements to post-employment benefits. The entity's obliga-
tion is therefore effectively limited to the amount it agrees to contribute to the fund and effectively
place actuarial and investment risk on the employee
Defined benefit plans These are post-employment benefit plans other than a defined contribution plans.
These plans create an obligation on the entity to provide agreed benefits to current and past employees
and effectively places actuarial and investment risk on the entity.
Defined contribution plans
For defined contribution plans, the amount recognised in the period is the contribution payable in
exchange for service rendered by employees during the period. [IAS 19(2011).51]
Contributions to a defined contribution plan which are not expected to be wholly settled within 12
months after the end of the annual reporting period in which the employee renders the related service
are discounted to their present value. [IAS 19.52]
Defined benefit plans
Basic requirements
An entity is required to recognise the net defined benefit liability or asset in its statement of financial
position. [IAS 19(2011).63] However, the measurement of a net defined benefit asset is the lower of any
surplus in the fund and the 'asset ceiling' (i.e. the present value of any economic benefits available in the
form of refunds from the plan or reductions in future contributions to the plan). [IAS 19(2011).64]
Measurement
The measurement of a net defined benefit liability or assets requires the application of an actuarial
valuation method, the attribution of benefits to periods of service, and the use of actuarial assumptions.
[IAS 19(2011).66] The fair value of any plan assets is deducted from the present value of the defined
benefit obligation in determining the net deficit or surplus. [IAS 19(2011).113]
The determination of the net defined benefit liability (or asset) is carried out with sufficient regularity
such that the amounts recognised in the financial statements do not differ materially from those that
would be determined at end of the reporting period. [IAS 19(2011).58]
The present value of an entity's defined benefit obligations and related service costs is determined using
the 'projected unit credit method', which sees each period of service as giving rise to an additional unit
of benefit entitlement and measures each unit separately in building up the final obligation. [IAS
19(2011).67-68] This requires an entity to attribute benefit to the current period (to determine current
service cost) and the current and prior periods (to determine the present value of defined benefit oblig-
ations). Benefit is attributed to periods of service using the plan's benefit formula, unless an employee's
service in later years will lead to a materially higher of benefit than in earlier years, in which case a
straight-line basis is used [IAS 19(2011).70]
Actuarial assumptions used in measurement
The overall actuarial assumptions used must be unbiased and mutually compatible, and represent the
best estimate of the variables determining the ultimate post-employment benefit cost. [IAS 19(2011).75-
76]:
Financial assumptions must be based on market expectations at the end of the reporting period [IAS
19(2011).80]
Mortality assumptions are determined by reference to the best estimate of the mortality of plan
members during and after employment [IAS 19(2011).81]
The discount rate used is determined by reference to market yields at the end of the reporting period on
high quality corporate bonds, or where there is no deep market in such bonds, by reference to market
yields on government bonds. Currencies and terms of bond yields used must be consistent with the
currency and estimated term of the obligation being discounted [IAS 19(2011).83]
Assumptions about expected salaries and benefits reflect the terms of the plan, future salary increases,
any limits on the employer's share of cost, contributions from employees or third parties*, and
estimated future changes in state benefits that impact benefits payable [IAS 19(2011).87]
Medical cost assumptions incorporate future changes resulting from inflation and specific changes in
medical costs [IAS 19(2011).96]
Updated actuarial assumptions must be used to determine the current service cost and net interest for
the remainder of the annual reporting period after a plan amendment, curtailment or settlement when
an entity remeasures its net defined benefit liability (asset) [IAS 19(2011).122A]*
* Added by Plan Amendment, Curtailment or Settlement (Amendments to IAS 19) in February 2018. The
amendments are effective for annual periods beginning on or after 1 January 2019.
Past service costs
Past service cost is the term used to describe the change in a defined benefit obligation for employee
service in prior periods, arising as a result of changes to plan arrangements in the current period (i.e.
plan amendments introducing or changing benefits payable, or curtailments which significantly reduce
the number of covered employees) .
Past service cost may be either positive (where benefits are introduced or improved) or negative (where
existing benefits are reduced). Past service cost is recognised as an expense at the earlier of the date
when a plan amendment or curtailment occurs and the date when an entity recognises any termination
benefits, or related restructuring costs under IAS 37 Provisions, Contingent Liabilities and Contingent
Assets. [IAS 19(2011).103]
Gains or losses on the settlement of a defined benefit plan are recognised when the settlement occurs.
[IAS 19(2011).110]
Before past service costs are determined, or a gain or loss on settlement is recognised, the net defined
benefit liability or asset is required to be remeasured, however an entity is not required to distinguish
between past service costs resulting from curtailments and gains and losses on settlement where these
transactions occur together. [IAS 19(2011).99-100]
Recognition of defined benefit costs
The components of defined benefit cost is recognised as follows: [IAS 19(2011).120-130]
Component Recognition
Service cost attributable to the current and past periods Profit or loss
Net interest on the net defined benefit liability or asset, determined using the discount rate at the
beginning of the period Profit or loss
Remeasurements of the net defined benefit liability or asset, comprising:
actuarial gains and losses
return on plan assets
some changes in the effect of the asset ceiling
Other comprehensive income
(Not reclassified to profit or loss in a subsequent period)
Other guidance
IAS 19 also provides guidance in relation to:
when an entity should recognise a reimbursement of expenditure to settle a defined benefit obligation
[IAS 19(2011).116-119]
when it is appropriate to offset an asset relating to one plan against a liability relating to another plan
[IAS 19(2011).131-132]
accounting for multi-employer plans by individual employers [IAS 19(2011).32-39]
defined benefit plans sharing risks between entities under common control [IAS 19.40-42]
entities participating in state plans [IAS 19(2011).43-45]
insurance premiums paid to fund post-employment benefit plans [IAS 19(2011).46-49]
Disclosures about defined benefit plans
IAS 19(2011) sets the following disclosure objectives in relation to defined benefit plans [IAS
19(2011).135]:
an explanation of the characteristics of an entity's defined benefit plans, and the associated risks
identification and explanation of the amounts arising in the financial statements from defined benefit
plans
a description of how defined benefit plans may affect the amount, timing and uncertainty of the entity's
future cash flows.
Extensive specific disclosures in relation to meeting each the above objectives are specified, e.g. a recon-
ciliation from the opening balance to the closing balance of the net defined benefit liability or asset, dis-
aggregation of the fair value of plan assets into classes, and sensitivity analysis of each significant
actuarial assumption. [IAS 19(2011).136-147]
Additional disclosures are required in relation to multi-employer plans and defined benefit plans sharing
risk between entities under common control. [IAS 19(2011).148-150].
Other long-term benefits
IAS 19 (2011) prescribes a modified application of the post-employment benefit model described above
for other long-term employee benefits: [IAS 19(2011).153-154]
the recognition and measurement of a surplus or deficit in an other long-term employee benefit plan is
consistent with the requirements outlined above
service cost, net interest and remeasurements are all recognised in profit or loss (unless recognised in
the cost of an asset under another IFRS), i.e. when compared to accounting for defined benefit plans,
the effects of remeasurements are not recognised in other comprehensive income.
Termination benefits
A termination benefit liability is recognised at the earlier of the following dates: [IAS 19.165-168]
when the entity can no longer withdraw the offer of those benefits - additional guidance is provided on
when this date occurs in relation to an employee's decision to accept an offer of benefits on termina-
tion, and as a result of an entity's decision to terminate an employee's employment
when the entity recognises costs for a restructuring under IAS 37 Provisions, Contingent Liabilities and
Contingent Assets which involves the payment of termination benefits.
Termination benefits are measured in accordance with the nature of employee benefit, i.e. as an en-
hancement of other post-employment benefits, or otherwise as a short-term employee benefit or other
long-term employee benefit. [IAS 19(2011).169]
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International Financial Reporting Standards

International Accounting Standards

International Accounting Standards

IAS 1 — Presentation of Financial Statements

IAS 7 — Statement of Cash Flows

IAS 8 — Accounting Policies, Changes in Accounting Estimates and Errors

IAS 10 — Events After the Reporting Period

IAS 11 — Construction Contracts

IAS 12 — Income Taxes

IAS 14 — Segment Reporting (Superseded)

IAS 16 — Property, Plant and Equipment

IAS 19 — Employee Benefits (2011)

IAS 19 — Employee Benefits (1998) (superseded)

IAS 20 — Accounting for Government Grants and Disclosure of Government Assistance

IAS 21 — The Effects of Changes in Foreign Exchange Rates

IAS 22 — Business Combinations (Superseded)

IAS 23 — Borrowing Costs

IAS 24 — Related Party Disclosures

IAS 26 — Accounting and Reporting by Retirement Benefit Plans

IAS 27 — Separate Financial Statements (2011)

IAS 27 — Consolidated and Separate Financial Statements (2008)

IAS 28 — Investments in Associates and Joint Ventures (2011)

IAS 28 — Investments in Associates (2003)

IAS 29 — Financial Reporting in Hyperinflationary Economies

IAS 31 — Interests In Joint Ventures

IAS 32 — Financial Instruments: Presentation

IAS 33 — Earnings Per Share

IAS 34 — Interim Financial Reporting

IAS 35 — Discontinuing Operations (Superseded)

IAS 36 — Impairment of Assets

IAS 37 — Provisions, Contingent Liabilities and Contingent Assets

IAS 39 — Financial Instruments: Recognition and Measurement

IAS 40 — Investment Property

October 1980 Exposure Draft E19 Accounting for Leases

September 1982 IAS 17 Accounting for Leases

1 January 1984 Effective date of IAS 17 (1982)

1994 IAS 17 (1982) was reformatted

April 1997 Exposure Draft E56, Leases

December 1997IAS 17 Leases

1 January 1999 Effective date of IAS 17 (1997) Leases

18 December 2003 Revised version of IAS 17 issued by the IASB

1 January 2005 Effective date of IAS 17 (Revised 2003)

1 January 2019 IAS 17 will be superseded by IFRS 16 Leases

IFRIC 4 Determining Whether an Arrangement Contains a Lease

SIC-15 Operating Leases – Incentives

SIC-27 Evaluating the Substance of Transactions in the Legal Form of a Lease

Amendments under consideration by the IASB

Leases – Comprehensive project

The following principles should be applied in the financial statements of lessees:

The following principles should be applied in the financial statements of lessors:

Sale and leaseback transactions

For a transaction that results in an operating lease: [IAS 17.61]

Disclosure: lessees – finance leases [IAS 17.31]

carrying amount of asset

the next year

years 2 through 5 combined

beyond five years

contingent rent recognised as an expense

total future minimum sublease income under noncancellable subleases

Disclosure: lessees – operating leases [IAS 17.35]

the next year

years 2 through 5 combined