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Amendments to IAS 38 and IAS 16 on revenue based Amortisation

The IASB has amended IAS 16, Property, plant and equipment and IAS 38, Intangible assets to clarify when a method of depreciation or amortisation based on revenue may be appropriate. The amendment to IAS 16 clarifies that depreciation of an item of property, plant and equipment based on revenue generated by using the asset is not appropriate.

The amendment to IAS 38 establishes a rebuttable presumption that amortisation of an intangible asset based on revenue generated by using the asset is inappropriate. The presumption may only be rebutted in certain limited circumstances:

• where the intangible asset is expressed as a measure of revenue; or