United States: On The Horizon For IFRS - November 6, 2012 - IFRIC Meeting September 2012

INTRODUCTION

All decisions reached at IFRS Interpretations Committee (IFRIC or the Committee) meetings are tentative and may be changed or modified at future meetings. Committee decisions become final only after completion of a formal vote on an Interpretation or Draft Interpretation, which is confirmed by the IASB.

The IFRS Interpretations Committee has issued the September 2012 IFRIC Update, which summarizes the deliberations during the Committee's meeting in London on September 18-19, 2012. Highlights of the meeting are discussed below.

CURRENT AGENDA

At its September 2012 meeting, the Committee discussed the following items on its current agenda.

IAS 16, Property, Plant and Equipment, IAS 38, Intangible Assets, and IFRIC 12, Service Concession Arrangements ‒ variable payments for the separate acquisition of property, plant, and equipment and intangible assets

Background

Previously, the Committee was asked to clarify the accounting for certain payments made by an operator in a service concession arrangement that is within the scope of IFRIC 12, Service Concession Arrangements. Specifically, the submitter asked the Committee to clarify whether such payments should either be

• Included in the measurement of an asset and liability at the start of the concession arrangement, or
• Treated as executory in nature and recognized as expenses as they are incurred over the term of the concession arrangement.

The Committee had noted that the issue of variable concession fees is linked to a previous issue discussed in 2011 regarding contingent payments made by an entity for the separate purchase of property, plant, and equipment and intangible assets outside of a business combination.

Current discussion

At the September 2012 meeting, the Committee discussed whether the principles that the IASB is developing in the project on leases should be used as a basis for the accounting for variable payments for the separate purchases of property, plant, and equipment and intangible assets. The Committee also discussed whether amendments to IFRS would be needed to ensure that the accounting for those variable payments is consistent with the principles in the project on leases. However, some Committee members were uncertain about applying the proposed leasing principles because that project is incomplete and the timing of a final leases standard is uncertain. Therefore, the Committee instructed the staff to develop a paper, on all of the following models that it has been considering, for discussion at a future meeting:

• The financial liability model based on the principles in IFRS on the accounting for a financial liability
• The IFRS 3 model based on the accounting for contingent consideration in IFRS 3, Business Combinations
• The IAS 16 / IAS 37 model based on the principles in IAS 16, Property, Plant and Equipment, IAS 37, Provisions, Contingent Liabilities and Contingent Assets, and IFRIC 1, Changes in Existing Decommissioning, Restoration and Similar Liabilities
• The leases model based on the tentative decisions to date in the project on leases

The staff was also directed to propose alternative models that focus on the debit side of the transaction instead of the recognition and measurement of the liability and to consider whether the remeasurement of the liability should be treated as an adjustment to the cost of the asset.

IAS 19, Employee Benefits ‒ accounting for contribution-based promises – reconsideration of Draft Interpretation D9, Employee Benefit Plans with a Promised Return on Contributions or Notional Contributions

Background

Several years ago, the Committee proposed IFRIC Draft Interpretation D9, Employee Benefit Plans with a Promised Return on Contributions or Notional Contributions, to address the accounting for contribution-based promises. However, rather than completing work on this issue, the Committee referred it to the Board to include it in the Board's post-employment benefits project. Because of the Board's decision not to address this issue currently, together with ongoing concerns about the accounting for contribution-based promises, in May 2012 the Committee decided to reconsider it.

In July 2012, the Committee tentatively decided to continue to work on developing limited-scope proposals on accounting for contribution-based promises that would be similar to the scope proposed in Draft Interpretation D9. The Committee asked the staff to perform outreach to determine the types of plans that it should consider in the future.

Current discussion

After discussing the results of the staff's outreach in September 2012, the Committee tentatively decided that employee benefit plans with the following characteristics would fall within the scope of this project:

• Plans that would be classified as defined contribution plans under IAS 19, Employee Benefits, if not for the guarantee provided by the employer on the return of the contributions made.
• Contributions to the plans can be notional.
• Returns on contributions to the plan would be guaranteed by the employer.
• The benefit under the plan would not depend on future events, such as salary changes or demographic risk.
• The guarantee under the plan may be based on the value of one or more underlying assets.

The Committee also tentatively decided that an employee post-employment benefit plan or other employee long-term benefits would be within the scope of the project as long as both of these conditions apply:

• The employer has a legal or constructive obligation to pay further contributions.
• The fund does not hold sufficient assets to pay for all employee benefits relating to employee service in the current and prior periods in respect of either (1) a promised return on actual or notional contributions or (2) any other guarantee on contributions, actual or notional based on the value of one or more underlying assets.

Measurement and presentation will be discussed at a future meeting.

IFRS INTERPRETATIONS COMMITTEE AGENDA DECISIONS

IFRIC agenda decisions are published for information only and do not change existing IFRS requirements. Committee agenda decisions are not Interpretations. Interpretations are determined only after extensive deliberation and due process, including a formal vote. Interpretations become final only when approved by the IASB.

After reviewing the following issues during the September 2012 meeting, the Committee decided not to add them to its agenda. For the full text of the Committee's agenda decisions, please refer to the IFRIC Update for the September 2012 meeting.

IAS 16, Property, Plant and Equipment, IAS 38, Intangible Assets, and IAS 17, Leases ‒ purchase of right to use land

Background

In January 2012, the Committee was asked to clarify whether the purchase of a right to use land (land right) should be accounted for as a purchase of property, plant, and equipment; a purchase of an intangible asset; or a lease of land. The submission was from a jurisdiction whose laws and regulations allow an entity only to purchase rights to exploit or build on land, not to own freehold title to land. The submitter stated that there is diversity in practice on how to account for a land right in that jurisdiction.

In May 2012, the Committee identified characteristics of a lease in the fact pattern submitted based on the definition of a lease in IAS 17, Leases. The Committee noted that a lease could be indefinite with extensions or renewals, which does not prevent a right to use from qualifying as a lease under IAS 17. The Committee also noted that the useful life, for depreciation purposes, might include renewal periods and that judgment would need to be applied in making this assessment.

Notwithstanding those observations, the Committee tentatively decided not to add this issue to its agenda because the particular fact pattern is specific to a jurisdiction.

Current discussion

In September 2012, the Committee reaffirmed its May 2012 tentative decision not to add this issue to its agenda.

IAS 19, Employee Benefits ‒ accounting for contribution-based promises ‒ impact of the 2011 amendments to IAS 19

Background

The Committee was asked to clarify the accounting for contribution-based promises in accordance with IAS 19, Employee Benefits (Revised 2011). The specific issue in this request is whether the revisions to IAS 19 made in 2011, such as the treatment of risk-sharing provisions, affect the accounting for contribution-based promises.

The Committee noted that the 2011 amendments, which clarified the treatment of risk-sharing features described in paragraph BC 144 of IAS 19 (Revised 2011), were not intended to address elements specific to contribution-based promises. In fact, paragraph BC148 of the revised standard states that addressing concerns about the measurement of contribution-based and similar promises is beyond the scope of the 2011 amendments.

In May 2012, the Committee stated that it does not expect the 2011 amendments to change the accounting for contribution-based promises, provided those promises do not include elements of risk-sharing arrangements between employees and employers. Therefore, the Committee tentatively decided not to add the issue to its agenda.

Current discussion

In September 2012, the Committee reaffirmed its May 2012 tentative decision not to add the issue to its agenda, but decided to amend some of the wording of that decision. Please refer to the September 2012 IFRIC Update for the text of the amended agenda decision. As noted in the "Current agenda" section above, the Committee is working on a proposal to address the accounting for contribution-based promises.

IAS 39, Financial Instruments: Recognition and Measurement ‒ derecognition of financial instruments upon modification

Background

The Committee was asked for guidance on the circumstances in which the restructuring of Greek Government Bonds (GGBs) would result in derecognition of the whole asset, or only part of the asset, in accordance with IAS 39, Financial Instruments: Recognition and Measurement.

A brief description of the restructuring of GGBs follows:

• A percentage of the principal is forgiven.
• A percentage of the principal is exchanged for 20 new bonds with different maturities and cash flow profiles.
• The remaining principal is exchanged for short-term securities guaranteed by a third party.
• The bondholders also receive a security that entitles the holder to payments linked to the gross domestic product (GDP) of the issuer for each new bond issued (GDP-linked security).
• All bondholders receive the same restructuring deal irrespective of the terms and conditions of their individual holdings. The different bonds are not modified in contemplation of their respective terms and conditions, but are instead replaced by a new uniform debt structure.
• The terms and conditions of the new bonds are substantially different from those of the old bonds, including changes in governing law, the introduction of both contractual collective action clauses and a co-financing agreement that affects the rights of the new bondholders, and modifications to the amount, term, and coupons.

In May 2012, the Committee noted that the request for guidance on the exchange of financial instruments was made in the context of a narrow fact pattern and that different views exist on how to account for the portion of the old GGB that is exchanged for 20 new bonds with different maturities and interest rates.

For the fact pattern submitted, the Committee concluded that either an assessment of extinguishment under paragraph 17(a) of IAS 39 or a substantial change in the terms of the asset would result in derecognition of the financial asset. Therefore, the Committee tentatively decided not to add this issue to its agenda.

Current discussion

In September 2012, the Committee reaffirmed its previous tentative decision not to add the issue to its agenda. Please refer to the September 2012 IFRIC Update for the full text of the Committee's agenda decision, including the Committee's analysis that led to its conclusion regarding this issue. The Committee noted that it has received a request for the IASB to develop guidance on the meaning of the word "expiry" in the context of derecognizing financial assets as part of the feedback on this tentative decision.

IAS 39, Financial Instruments: Recognition and Measurement ‒ classification of a GDP-linked security

Background

The Committee was also asked how to account for the GDP-linked security that is offered as part of the restructuring of Greek Government Bonds (GGBs). The submission discusses four alternative approaches to account for the GDP-linked security. Each alternative is based on the assumption that the indexation to the issuer's GDP is a non-financial variable specific to a party to the contract. However, the submitter noted that the guidance in IAS 39, Financial Instruments: Recognition and Measurement, refers to a non-financial variable that is not specific to a party to the contract, but does not explain what the phrase means.

In May 2012, the Committee noted that on several occasions, both the Board and the Committee have considered, but not resolved, the question of what constitutes an underlying that is "a non-financial variable specific to a party to the contract." Therefore, the Committee expressed concern that it would not be able to resolve the issue efficiently within the confines of existing IFRS, the Conceptual Framework, and the demands of the interpretation process and that it would probably be unable to reach a consensus on a timely basis.

The Committee did, however, highlight certain aspects that should be considered when assessing the accounting for GDP-linked securities:

• The GDP-linked security is a structured option that entitles the holder to cash payments, depending on the nominal and the real GDP of the issuer exceeding particular thresholds.
• Mandatory classification as at fair value through profit or loss applies only, by definition, if the GDP-linked security is a derivative or is otherwise held for trading.
• The definition of loans and receivables in IAS 39 excludes those financial assets "for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration, which shall be classified as available for sale."
• The definition of held-to-maturity investments requires an entity to have both a positive intention and the ability to hold a financial asset to maturity. The application guidance in IAS 39 clarifies that "the criteria for classification as a held-to-maturity investment are met for a financial asset that is callable by the issuer if the holder intends and is able to hold it until it is called or until maturity and the holder would recover substantially all of its carrying amount."
• GDP-linked securities are classified as available-for-sale debt instruments unless they are classified as at fair value through profit or loss.
• Entities should consider the operational complexities of applying the effective interest method to the GDP-linked securities because of their complex cash flow profile.

In May 2012, the Committee concluded that no clarification of IAS 39 was required for the accounting for GDP-linked securities, noting that IFRS 9, Financial Instruments, already used a different classification for financial assets. Therefore, the Committee tentatively decided not to add the issue to its agenda.

Current discussion

In September 2012, the Committee reaffirmed its previous tentative decision not to add the issue to its agenda.

IFRS INTERPRETATIONS COMMITTEE TENTATIVE AGENDA DECISIONS

Committee agenda decisions are not Interpretations. Interpretations are determined only after extensive deliberation and due process, including a formal vote. Interpretations become final only when approved by the IASB.

After reviewing the following issues during the September 2012 meeting, the Committee tentatively decided not to add them to its agenda. The Committee will reconsider these tentative decisions, including its reasons for not adding the issues to the agenda, at the January 2013 meeting. For the full text of the Committee's tentative agenda decisions, please refer to the September 2012 IFRIC Update .

IFRS 3, Business Combinations - continuing employment

Background

In January 2012, the Committee was asked to clarify the guidance in IFRS 3, Business Combinations, for contingent payments made to selling shareholders if those shareholders become employees. The specific issue is whether paragraph B55(a) of IFRS 3 is conclusive, on its own, in determining whether payments made to an employee that are forfeited upon termination of employment are considered remuneration for post-combination services and should therefore be excluded from consideration paid for the acquisition.

The wording in the introduction to paragraph B55 of IFRS 3 states that the acquirer should consider the indicators in paragraphs B55(a) through B55(h) to determine whether an arrangement for payments to employees or selling shareholders is considered either part of the exchange transaction for the acquiree or a separate transaction from the business combination. However, the wording in paragraph B55(a) states that payments in a contingent consideration arrangement that are automatically forfeited if employment terminates are remuneration for post-combination services.

Since IFRS 3 is the result of the joint effort between the IASB and the FASB to promote the convergence of accounting standards, the Committee decided to consult with the IASB and FASB on whether paragraph B55(a) of IFRS 3 and the U.S. GAAP equivalent guidance are conclusive when analyzing the contingent payments described.

In July 2012, the staff informed the Committee that the preliminary view of many IASB members is that they would prefer amending IFRS 3 to make the guidance in paragraph B55(a) indicative and not conclusive. However, many Board members shared the Committee's concern not to create divergent guidance with U.S. GAAP on a standard that was developed jointly with the FASB to promote the convergence of accounting standards. Therefore, the staff agreed to discuss this issue with the FASB and to update the Committee on the results of that discussion.

Current discussion

In September 2012, the Committee was informed that FASB members preferred to wait until the Post-Implementation Review of FASB Statement 141R, Business Combinations, has been completed before undertaking any related clarification projects. After that review has been completed, the Committee can coordinate its work on this issue with the FASB.

The Committee did note that unless an arrangement is not substantive, payments made under a contingent consideration arrangement that are automatically forfeited if employment terminates should lead to a conclusion that the arrangement is compensation for post-combination services rather than additional consideration for an acquisition. However, the Committee tentatively decided not to add this issue to its agenda at this time to avoid creating divergence with U.S. GAAP.

IAS 27, Consolidated and Separate Financial Statements, and IFRS 10, Consolidated Financial Statements ‒ noncash acquisition of noncontrolling interest by a controlling shareholder in the consolidated financial statements

Background

The Committee was asked to provide guidance on the accounting for the purchase of a noncontrolling interest (NCI) by the controlling shareholder when the consideration given includes noncash items. The specific issue is whether the difference between the fair value and the carrying amount of the consideration should be recognized in equity or in profit or loss.

The submitter asserted that such difference should be recognized in equity under paragraph 31 of IAS 27, Consolidated and Separate Financial Statements, but in profit or loss if IFRIC 17, Distributions of Non-cash Assets to Owners, is applied by analogy. Therefore, the submitter asked the Committee to resolve the conflict between the guidance in IAS 27 and IFRIC 17.

Current discussion

The Committee noted that paragraph 31 of IAS 27 addresses the difference between the carrying amount of NCI and the fair value of the consideration given, and not the difference between the fair value and the carrying amount of such consideration. The difference between the carrying amount of NCI and the fair value of the consideration given must be recognized in equity. However, the difference between the fair value of the assets transferred and their carrying amount arises from derecognition of those assets, and any gain or loss arising from derecognition of an asset is generally recognized in profit or loss under IFRS.

In light of the existing IFRS requirements, the Committee concluded that an interpretation or an amendment to IFRS is not necessary and tentatively decided not to add this issue to its agenda.

IAS 28, Investments in Associates ‒ impairment of investments in associates in separate financial statements

Background

In July 2012, the Committee reviewed a number of issues referred to the IASB that remain unresolved. The Committee asked the staff to update the analysis and outreach on several of those issues, including the impairment of investments in associates in separate financial statements. The specific issue is whether an entity should apply, in its separate financial statements, the provisions of IAS 36, Impairment of Assets, or IAS 39, Financial Instruments: Recognition and Measurement, to test investments in subsidiaries, joint ventures, and associates that are carried at cost for impairment.

Current discussion

In September 2012, the Committee noted that paragraph 38 of IAS 27, Consolidated and Separate Financial Statements, requires an entity to account for investments in subsidiaries, joint ventures, and associates either at cost or in accordance with IAS 39 in its separate financial statements. In addition, according to paragraphs 4 and 5 of IAS 36 and paragraph 2(a) of IAS 39, investments in subsidiaries, joint ventures, and associates accounted for at cost are within the scope of IAS 36. However, investments in subsidiaries, joint ventures, and associates accounted for in accordance with IAS 39 are within the scope of that standard. Therefore, in its separate financial statements, an entity should apply the provisions of IAS 36 to test for impairment its investments in subsidiaries, joint ventures, and associates that are carried at cost.

In light of these existing requirements, the Committee concluded that an interpretation or an amendment to IFRS is unnecessary and tentatively decided not to add this issue to its agenda.

IAS 39, Financial Instruments: Recognition and Measurement ‒ income and expenses arising on financial instruments with a negative yield ‒ presentation in the statement of comprehensive income

Background

In the current economic environment, the demand for safe harbor investments has increased to the point where the yield on some assets, such as high quality government bonds, has turned negative. The issue before the Committee is how income and expense that result from negative interest rates on financial instruments should be presented in the statement of comprehensive income.

Current discussion

The Committee discussed this issue in September 2012 and made the following observations:

• The amount resulting from a negative effective interest rate on a financial asset does not meet the definition of interest revenue in IAS 18, Revenue, because it reflects a gross outflow, and not a gross inflow, of economic benefits.
• The amount resulting from a negative effective interest rate on a financial asset is not an interest expense because it arises on a financial asset and not on a financial liability of the entity.
• The expense arising on a financial asset stemming from a negative effective interest rate should not be presented as interest revenue or interest expense, but in some other appropriate expense classification. In addition, paragraphs 85 and 112(c) of IAS 1, Presentation of Financial Statements, require an entity to present additional information about such an amount if it is relevant to understanding the entity's financial performance or this item.

In the light of the existing IFRS requirements, the Committee concluded that an interpretation was not necessary and therefore tentatively decided not to add this issue to its agenda.

IFRIC WORK IN PROGRESS

IFRS 3, Business Combinations, and IFRS 2, Share-based Payment ‒ accounting for reverse acquisitions that do not constitute a business

Background

The Committee was asked to provide guidance on how to account for reverse acquisition transactions when the accounting acquiree is not a business. Because IFRS 3, Business Combinations, does not provide such guidance, different views exist on how to account for these transactions.

The two scenarios submitted both include a nonoperating entity (an accounting acquiree) with a public listing that is used to provide an existing nonlisted operating entity (an accounting acquirer) with a market listing through a combination of both entities. After the combination, the combined entity retains the nonoperating entity's listing, and the former shareholders of the operating entity become the majority shareholders of the combined entity. As a result of the combination, there is a difference between the consideration received from the accounting acquiree and the consideration transferred by the accounting acquirer.

Current discussion

The Committee tentatively observed that a reverse acquisition transaction in which the accounting acquiree is not a business is a share-based payment transaction that would be accounted for in accordance with IFRS 2, Share-based Payment, based on the fact that the nonlisted operating entity issued shares in return for obtaining a service (a listing) from the nonoperating entity.

The Committee also observed that the legal acquirer would be identified and accounted for as the accounting acquiree by analogy to the guidance in paragraphs B19–B27 of IFRS 3 for reverse acquisitions. In applying the guidance in paragraphs B19–B27, the consideration transferred by the accounting acquirer would be based on the number of equity interests that the nonlisted operating entity would have had to issue to give the listed entity the same percentage equity interest in the combined entity that results from the reverse acquisition. In addition, the Committee tentatively observed that the difference between the amount of the consideration transferred and the identifiable assets acquired (cash and/or other net assets that do not constitute a business) would be recognized as an expense (representing the cost of the listing). Some Committee members noted that in some jurisdictions, companies would identify within this amount incremental transaction costs directly attributable to issuing the equity instruments. Such costs are accounted for as a deduction from equity in accordance with IAS 32, Financial Instruments: Presentation.

The Committee asked the staff to draft a tentative agenda decision that would include the main issues addressed in this discussion for consideration at a future meeting.

IAS 19, Employee Benefits ‒ measurement of the net defined benefit obligation for post-employment benefit plans with employee contributions

Background

In May 2012, the Committee was asked to clarify the guidance on accounting for employee contributions to defined benefit plans in paragraph 93 of IAS 19, Employee Benefits (Revised 2011). IAS 19 (Revised 2011) is effective for annual periods beginning on or after January 1, 2013.

According to the submitter, paragraph 93 of IAS 19 is to address the measurement of the net defined benefit obligation (DBO) for plans in which the risk of plan deficits and surpluses is shared with employees through their contributions to the plan. However, the submitter is concerned that the guidance in paragraph 93 could affect any plan with employee contributions, resulting in a change in measurement of the net DBO for substantially all of those plans, which the submitter thinks is an unintended consequence of the language in that paragraph.

Current discussion

In September 2012, the Committee noted that the IASB had previously discussed various aspects of risk-sharing features while reviewing comments received on the Exposure Draft, Defined Benefit Plans, including how to account for the effect of employee contributions. The Committee noted that the Board's views of those discussions, as well as the proposals in the Exposure Draft and the requirements in paragraph 93 of IAS 19, are all consistent: They require all employee contributions, including expected future contributions resulting from employee service in the current and prior periods, to be considered in calculating the DBO.

However, in light of the concerns of the submitter and other interested parties about the clarity of guidance in paragraph 93, the Committee asked the staff to develop specific examples illustrating how to account for employee contributions for discussion at a future meeting.

IAS 40, Investment Property ‒ accounting for a structure that appears to lack the physical characteristics of a building

Background

The Committee was asked to clarify whether telecommunication towers in a jurisdiction should be accounted for as property, plant, and equipment under IAS 16, Property, Plant and Equipment, or as investment property under IAS 40, Investment Property. According to the submission, an entity owns telecommunication towers and receives rent revenue in exchange for leasing spaces in the towers to telecommunication operators. These operators attach their own devices to the towers, and the entity provides them with some basic services such as maintenance.

The submitter is specifically seeking clarification on (1) whether a telecommunication tower should be viewed as a "building" and therefore as "property" as described in paragraph 5 of IAS 40, and (2) how the service element in the leasing agreement and the entity's business model affect the analysis of this issue.

Current discussion

In September 2012, the Committee noted that the key factor in determining whether the tower meets the definition of investment property is the meaning of the term "building" in paragraph 5 of IAS 40. The Committee also noted that under IAS 40, an entity is required to assess whether the ancillary services that it provides are significant to the arrangement as a whole, in which case the property would be accounted for as property, plant, and equipment rather than as investment property.

Although the tower described in the submission has some of the characteristics of investment property (for instance, rental income from spaces in the tower), the Committee questioned whether the tower qualifies as a "building" since it lacks the features of a building, such as walls, floors, and a roof.

The Committee noted that the rental of spaces in telecommunication towers, which appears to be an emerging business model, could similarly arise with other structures, such as gas storage tanks and advertising billboards.

Based on its discussion, the Committee asked the staff to analyze this issue further and to consider the feasibility of amending the scope of IAS 40 to address this issue.

IAS 41, Agriculture, and IFRS 13, Fair Value Measurement ‒ valuation of biological assets using a residual method

Background

Previously, the Committee was asked to clarify paragraph 25 of IAS 41, Agriculture, which permits the use of a residual method to arrive at the fair value of biological assets physically attached to land if no market exists for the biological assets but an active market exists for the combined assets. Under the residual method, the fair value of raw land and land improvements would be deducted from the fair value of the combined assets to arrive at the fair value of biological assets.

Under IFRS 13, Fair Value Measurement, the fair value measurement of a non-financial asset is based on its highest and best use. The submitter's concern is that the residual method might result in a minimal or nil fair value for the biological assets if the highest and best use of the raw land and land improvements differs from its current use.

The Committee discussed this issue in May 2012, but decided not to propose an amendment to IFRS at that time. Instead, the Committee instructed the staff to develop proposed wording for a tentative agenda decision for discussion at a future meeting.

Current discussion

In September 2012, the Committee noted that the land in the asset group in the example submitted would provide a maximum value to market participants on a stand-alone basis when used in a manner different from its current use. IFRS 13 requires that the fair value of the other assets within the asset group, including biological assets and land improvements, must reflect their use on a stand-alone basis, because the asset group as a whole provides the maximum value to market participants. Therefore, the fair value of the biological assets might be minimal or nil if the residual method is used. However, IAS 41 does not require the use of the residual method.

Since the IASB plans to discuss whether to add a limited-scope project on IAS 41 for bearer biological assets to its technical agenda in September 2012, the Committee decided to defer making a tentative agenda decision on this issue at this time.

OUTSTANDING ISSUES UPDATE

The Committee was updated on four new issues and three ongoing issues for consideration at a future meeting. One other issue is on hold and will be considered in the future. All other requests received and considered by the staff were discussed at this meeting.

FUTURE MEETINGS

The next Committee meeting will be held on November 13-14, 2012.

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