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IAS 41 — Taxation in fair value measurements

Date recorded:

Background

This was a new issue.

The IC received a request to consider amending IAS 41 to remove the requirement of using pre-tax cash flows when measuring the fair value of a biological asset.

In 2008, the Board amended IAS 41 to remove the requirement to use a pre-tax discount rate when determining the fair value of a biological asset. However, the requirement to use pre-tax cash flows in paragraph 22 survived this amendment for no apparent reason. When IFRS 13 was issued in 2011, the Board consequentially amended IAS 41 to remove all the fair value measurement guidance except for paragraph 22, which contains specific requirements for the fair value measurement of biological assets.

The submitter noted that using pre-tax cash flows is inconsistent with the requirements of IFRS 13, which requires the fair value to be determined based on how a market participant would value the asset, which could be pre-tax or post-tax, depending on facts and circumstances and as long as the assumptions are internally consistent.

Staff analysis

Outreach conducted by the Staff indicated support for amending IAS 41 to fix this oversight.

Staff recommendation

The Staff recommended that the Board:

  1. propose to amend IAS 41.22 to remove the requirement to use pre-tax cash flows when measuring the fair value of a biological asset; and
  2. include this proposed amendment in its next annual improvements cycle.

Discussion

The IC approved the Staff recommendation without any significant discussion.

Correction list for hyphenation

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