In 2011 the IFRS Interpretations Committee (IFRS IC) received a request to clarify the meaning of the term ‘consumption of the expected future economic benefits embodied in the asset’ in IAS 38 Intangible Assets paragraph 97, when determining the appropriate amortisation method.
The IFRS IC then referred the issue to the International Accounting Standards Board (IASB), suggesting that an amendment be made to both IAS 38 and IAS 16 Property, Plant and Equipment to clarify that revenue-based methods of depreciation and amortisation are not appropriate, as they do not reflect the pattern of economic benefits consumed from the use of the asset by the entity.
In December 2012 the IASB published Exposure Draft ED/2012/5 Clarification of Acceptable Methods of depreciation and Amortisation (Proposed Amendments to IAS 16 and IAS 38), that proposed to clarify that revenue-based methods of depreciation and amortisation are not appropriate, with a comment deadline of April 2013.
The IASB deliberated the comments received from constituents and subsequently released the final amendments to IAS 16 and IAS 38 in May 2014. The HKICPA published the equivalent amendments to HKAS 16 Property, Plant and Equipment and HKAS 38 Intangible Assets on 5 June 2014.