retain, possibly with modification, certain guidance that would supplement the provisions
of IAS 16 or would address incremental accounting matters, provided the guidance was
not inconsistent with IAS 16. The FASB could consider the following matters and
approaches in incorporating IAS 16 into U.S. GAAP:
· IAS 16 contains the IFRS requirements for capitalizing and depreciating property,
plant, and equipment. These aspects of ASC 360 could be replaced with the
respective IFRS requirements.
· IAS 16 contains concepts that are not found in ASC 360, such as the
"componentization" of property, plant, and equipment and the option to elect to
use a revaluation model. These aspects of IAS 16 could be incorporated into ASC
360 representing new requirements for U.S. issuers to apply subsequent to the
effective date of incorporating IAS 16 into U.S. GAAP.
· ASC 360 includes the impairment model for property, plant, and equipment. The
equivalent model in IFRS is included in IAS 36, Impairment of Assets. The
FASB would have various alternatives for incorporating the IFRS impairment
guidance into U.S. GAAP. Such alternatives could include the following:
retaining the impairment-related aspects of ASC 360 until such time that IAS 36
is incorporated into the ASC; coordinating the incorporation of IAS 36 with that
of IAS 16; or other approaches that facilitate an orderly transition to the
accounting for property, plant, and equipment under IFRS.
· Before incorporating the new requirements, the FASB would need to determine
whether incorporating the new requirements would have implications for areas of
the ASC outside of ASC 360. Any affected areas of the ASC outside of ASC 360
would need to be contemplated at the time of incorporation of IAS 16.
· There is a variety of industry and other supplemental guidance associated with
ASC 360 (e.g., ASC 908-360, Airlines, and ASC 980-360, Regulated
Operations). The FASB would evaluate this guidance and, as described earlier,
may eliminate the guidance, or modify or retain it on a temporary or permanent
basis, depending in each case on the outcome of its detailed assessment.
For U.S. issuers, one of the most significant aspects of implementing IAS 16 may be the
componentization requirement. Componentization, which relates to separating the cost of
a fixed asset into certain component parts for purposes of calculating depreciation
expense and derecognizing the fixed asset, is not necessarily a difficult concept to
understand, but may be difficult to apply if U.S. issuers were required to componentize,
to a greater degree than they have done in the past, property, plant, and equipment on a
retrospective basis. Retrospective application could require U.S. issuers to expend
significant efforts to analyze significant numbers of recorded assets. To minimize the
implementation effort, the FASB may determine that the componentization aspects of
IAS 16, if not the entire standard, would be best incorporated on a prospective basis, for
example, for all property, plant, and equipment acquired subsequent to the effective date
of IAS 16 as incorporated into the ASC.
As highlighted by the interdependency between IAS 16 and IAS 36, incorporating IFRSs
in a phased approach would often involve replacing aspects of more than one ASC Topic