[Paragraphs BC35A–BC35F were added as a consequence of amendments to IAS 16 by Improvements to IFRSs issued in May 2008. At the same time, the Board also amended paragraph 6 by replacing the term ‘net selling price’ in the definition of ‘recoverable amount’ with ‘fair value less costs to sell’ for consistency with the wording used in IFRS 5 Non‑current Assets Held for Sale and Discontinued Operations and IAS 36.]

BC35A The Board identified that, in some industries, entities are in the business of renting and subsequently selling the same assets.

BC35B The Board noted that the Standard prohibits classification as revenue of gains arising from derecognition of items of property, plant and equipment. The Board also noted that paragraph BC35 states the reason for this is ‘users of financial statements would consider these gains and the proceeds from an entity’s sale of goods in the course of its ordinary activities differently in their evaluation of an entity’s past results and their projections of future cash flows.’

BC35C Consistently with that reason, the Board concluded that entities whose ordinary activities include renting and subsequently selling the same assets should recognise revenue from both renting and selling the assets. In the Board’s view, the presentation of gross selling revenue, rather than a net gain or loss on the sale of the assets, would better reflect the ordinary activities of such entities.