could include blockchain processing fees. Where an intangible asset is acquired in
exchange for another non-monetary asset, the cost is measured at fair value, unless the
transaction lacks commercial substance or the fair value of neither the asset acquired
nor the asset given up can be measured reliably. In such instances, the cost of the
intangible asset is measured as the carrying amount of the asset given up.
11.5.2
Crypto-assets – Subsequent measurement
As discussed at 8 above, there are two subsequent measurement approaches under
IAS 38 that can be applied as an accounting policy choice to each class of intangible
asset, namely:
• Cost model.
• Revaluation model (subject to criteria as discussed below).
An entity that holds different types of crypto-assets would need to assess whether they
constitute different classes of intangible assets as the rights and underlying economics
of different crypto-assets vary widely.
11.5.2.A
Crypto-assets – Cost model
The cost method under IAS 38 entails subsequent measurement at cost less any
amortisation and impairment (see 8.1 above).
Many crypto-assets such as Bitcoin do not have an expiry date, and there appears to be
no foreseeable limit to the period over which they could be exchanged with a willing
counterparty for cash or other goods or services.
A holder will therefore need to consider if there is a foreseeable limit to the period over
which such a crypto-asset is expected to generate net cash inflows for the entity. If there
is no foreseeable limit, such a crypto-asset could be considered to have an indefinite
useful life and, as a result, no amortisation is required. However, intangible assets with
an indefinite useful life need to be tested for impairment at least annually and whenever
there is an indication of impairment (see 9.3 above).
Where there is a foreseeable limit to the period over which a crypto-asset is expected
to generate net cash inflows for the holder, a useful life should be estimated and the cost
of the crypto-asset, less any residual value, should be amortised on a systematic basis
1290 Chapter 17
over this useful life (see 9.2 above). In addition, such a crypto-asset is also subject to
IAS 36 impairment testing whenever there is an indication of impairment.
11.5.2.B
Crypto-assets – Revaluation model
An entity can only apply the revaluation model if the fair value can be determined by
reference to an active market (see 8.2 above), which IFRS 13 defines as ‘a market in
which transactions for the asset or liability take place with sufficient frequency and
volume to provide pricing information on an ongoing basis’.
There are no provisions in IAS 38 that allow for the fair value of an intangible asset to
be determined indirectly, for example by using valuation techniques and financial
models applied to estimate the fair value of intangible assets acquired in a business
combination. Consequently, if no observable price in an active market for an identical
asset exists (i.e. a Level 1 price under IFRS 13), the holder will need to apply the cost
method to crypto-assets held.
In assessing whether an active market exists for a crypto-asset, the holder will need to
consider whether there is economic substance to the observable transactions, as many
trades on crypto-exchanges are non-cash transactions in which one crypto-asset is
exchanged for another.
Under the revaluation model, intangible assets are measured at their fair value on the
date of revaluation less any subsequent amortisation and impairment losses.
The net increase in fair value over the initial cost of the intangible asset is recorded in
the revaluation reserve via other comprehensive income. A net decrease below cost is
recorded in profit or loss. The cumulative revaluation reserve may be transferred
directly to retained earnings upon derecognition, and possibly by transferring the
additional amortisation on the revalued amount to retained earnings as the asset is used,
but IAS 38 does not allow the revaluation reserve to be transferred via profit or loss.
11.5.3
Crypto-assets – Standard setter activity
Accounting standard setters are monitoring the development of crypto-assets and the
related accounting practices by holders. Some standard setters have undertaken research
into the accounting for crypto-assets, while some have expressed a view on what they
consider to be appropriate accounting under IFRS. For example, in Japan the standard setter
has issued authoritative guidance for the accounting of crypto-assets under local GAAP.
The Accounting Standards Advisory Forum (ASAF) of the IASB discussed the topic of
‘digital currencies’ in December 2016 based on a paper prepared by the Australian
Accounting Standards Board. The paper indicates a need for standard setting activity
that addresses the use of crypto-assets. It notes that the possible classification of crypto-
assets is currently limited to inventory and intangible assets and that, aside from the
commodity inventory of broker-traders, current IFRS requirements does not permit a
crypto-asset to be measured at fair value through profit or loss which, in their view,
would provide the most relevant and useful information.20 Some members of the ASAF
voiced their support for a wider project to address the issue of measuring certain
intangibles at fair value through profit or loss. However, it was suggested that, while the
IASB should monitor the development of digital currencies, the Board should not add
the topic to its agenda at this stage.21
Intangible
assets
1291
In January 2018, the IASB discussed some transactions involving specific types of
commodities, digital currencies and emissions allowances that might form part of its research
agenda. Specifically, they considered the fact that these transactions typically involve items
held for investment purposes or used in a similar way to cash. The Board will discuss whether
to add a research project on some, or all, of these transactions at a future meeting.22
In April 2018, the ASAF, among others, discussed the prevalence of digital currencies in
ASAF members’ jurisdictions and provided advice to the IASB on the potential
standard-setting projects to consider.23
In July 2018, the IASB discussed transactions involving commodities and
cryptocurrencies. The Board asked the Interpretations Committee to provide further
information about how an entity might apply existing IFRSs in determining its
accounting for holdings of cryptocurrencies and Initial Coin Offerings (an unregulated
means by which funds are raised for a new cryptocurrency venture). The Board will
consider this information at a future meeting.24
References
1
IASB Update, May 2016.
Agency, amending Directive 1999/45/EC and
2
IASB Update, February 2018.
repealing Council Regulation (EEC) No. 793/93
3
IASB Update, April 2018.
and Commission Regulation (EC) No. 1488/94 as
4 DP/2014/2, Reporting the Financial Effects of Rate
well as Council Directi
ve 76/769/EEC and
Regulation, IASB September 2014, para. 5.1.
Commission Directives 91/155/EEC, 93/67/EEC,
5 IASB Update, March 2018.
93/105/EC and 2000/21/EC.
6 European Commission website,
19
CoinMarketCap
website,
http://ec.europa.eu/clima/policies/ets/
http://www.coinmarketcap.com (accessed on
index_en.htm (accessed on 28 June 2018).
28 June 2018).
7
IASB Update, June 2005.
20 The Australian Accounting Standards Board
8
IASB Staff Paper, Pollutant Pricing
website, http://www.aasb.gov.au/admin/file/
Mechanisms, Project update and response to the
content102/c3/AASB_ASAF_DigitalCurrency
Agenda Consultation, April 2016.
.pdf (accessed on 28 June 2018).
9 IFRS Foundation website, http://www.ifrs.org/
21
IFRS
Foundation
website,
projects/research-programme/#the-research-
http://www.ifrs.org/-/media/feature/meetings/
pipeline (accessed on 28 June 2018).
2016/december/asaf/asaf-summary-dec-2016.pdf
10
IFRIC
3,
Emission Rights, 2005 Bound Volume,
(accessed on 28 June 2018).
IASB, para. 2.
22
IASB Update, January 2018.
11
IFRIC
3.3.
23
IFRS
Foundation
website, http://www.ifrs.org/-
12
IFRIC
3.5.
/media/feature/meetings/2018/april/asaf/asaf-
13
IFRIC
3.6.
summary-april-2018.pdf
14
IFRIC
3.7.
(accessed on 28 June 2018).
15
IFRIC
3.8.
24
IASB Update, June 2018.
16
IFRIC
3.9.
17
IASB Update, June 2005.
18 Regulation (EC) No. 1907/2006 of the European
Parliament and of the Council of 18 December
2006 concerning the Registration, Evaluation,
Authorisation and Restriction of Chemicals
(REACH), establishing a European Chemicals
1292 Chapter 17
1293
Chapter 18
Property, plant and
equipment
1 INTRODUCTION ........................................................................................... 1297
2 THE REQUIREMENTS OF IAS 16 ................................................................ 1298
2.1
Scope ..................................................................................................................... 1298
2.2 Definitions
used
in IAS 16 ................................................................................. 1299
3 RECOGNITION ............................................................................................ 1300
3.1
Aspects of recognition ....................................................................................... 1301
3.1.1
Spare parts and minor items ............................................................. 1301
3.1.2
Environmental and safety equipment ............................................ 1301
3.1.3
Property economic benefits and property developments ......... 1302
3.1.4
Classification as PP&E or intangible asset ..................................... 1303
3.1.5
Classification of items as inventory or PP&E when
minimum levels are maintained ....................................................... 1303
3.1.6 Production
stripping
costs of surface mines ................................. 1304
3.1.7
Bearer plants ........................................................................................ 1305
3.2
Accounting for parts (‘components’) of assets .............................................. 1306
3.3
Initial and subsequent expenditure ................................................................. 1306
3.3.1
Types of parts ...................................................................................... 1307
3.3.2 Major
inspections
...............................................................................
1308
4 MEASUREMENT AT RECOGNITION ........................................................... 1309
4.1
Elements of cost and cost measurement ........................................................ 1309
4.1.1
‘Directly attributable’ costs ................................................................ 1311
4.1.2 Borrowing
costs
...................................................................................
1311
4.1.3
Administration and other general overheads ............................... 1312
4.1.4
Cessation of capitalisation ................................................................ 1312
4.1.5 Self-built
assets ................................................................................... 1312
4.1.6 Deferred
payment
...............................................................................
1313
1294 Chapter 18
4.1.7
Land and buildings to be redeveloped ............................................ 1313
4.1.8 Transfers
of
assets from customers ................................................ 1314
4.1.9 Variable
pricing
...................................................................................
1314
4.2
Incidental and non-incidental income ............................................................ 1315
4.2.1
Income earned while bringing the asset to the intended
location and condition ....................................................................... 1316
4.2.2
Income received during the construction of property ................ 1317
4.2.3 Liquidated
damages during construction ....................................... 1318
4.3
Accounting for changes in decommissioning and restoration costs......... 1318
4.4 Exchanges
of
assets ............................................................................................ 1318
4.4.1
Commercial substance ...................................................................... 1319
4.4.2 Reliably
measurable ........................................................................... 1320
4.5
Assets held under leases .................................................................................... 1320
4.6
Assets acquired with the assistance of government grants ........................ 1321
5 MEASUREMENT AFTER RECOGNITION: COST MODEL ............................. 1321
5.1
Significant parts of assets ...............................................
................................... 1321
5.2 Depreciable
amount
and
residual values ....................................................... 1323
5.3 Depreciation
charge
...........................................................................................
1323
5.4 Useful
lives ........................................................................................................... 1324
5.4.1
Repairs and maintenance .................................................................. 1325
5.4.2 Land
.......................................................................................................
1326
5.4.3 Technological change ........................................................................ 1326
5.5
When depreciation starts .................................................................................. 1327
5.6 Depreciation
methods
.......................................................................................
1327
5.6.1
Diminishing balance methods .......................................................... 1328
5.6.2 Unit-of-production
method
.............................................................
1329
5.7
Impairment ........................................................................................................... 1329
6 MEASUREMENT AFTER RECOGNITION: REVALUATION MODEL ............. 1330
6.1
The meaning of fair value .................................................................................. 1331
6.1.1
Revaluing assets under IFRS 13 ........................................................ 1331
6.1.1.A
Highest and best use ...................................................... 1332
6.1.1.B Valuation
approaches
.................................................... 1333
6.1.1.C
The cost approach: current replacement cost
and depreciated replacement cost (DRC) ................. 1334
6.2
Accounting for valuation surpluses and deficits ........................................... 1335
6.3
Reversals of downward valuations .................................................................. 1337
6.4
Adopting a policy of revaluation ..................................................................... 1338
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 255
