The IFRS Interpretations Committee (IFRIC) has been discussing a request to clarify the accounting treatment for net proceeds from selling items produced while preparing property, plant, and equipment (PPE) for its intended use. The submitter questioned whether proceeds exceeding testing costs should be recognized in profit or loss or deducted from the PPE's cost. Additionally, concerns were raised about the lack of disclosure requirements regarding the accounting for net proceeds and testing costs. This issue highlights the need for clearer guidance to ensure consistent and transparent reporting practices for such transactions.
The analysis of the issue has been included in the agenda papers in July 2014 and the IFRIC has tentatively decided that it would not add this topic to the agenda. IFRIC considered that in the light of its analysis of the existing IFRS requirements, IAS 16 'Property, Plant and Equipment' and IAS 1 'Presentation of Financial Statements' contain sufficient guidance and neither an Interpretation nor an amendment to a Standard was necessary. Consequently, they tentatively decided not to add the issue to its agenda.
In our comment letter we agree that this issue should not be added to the IFRIC's agenda although we disagree with the rationale expressed in the tentative decision and the interpretive language it contains.
