Defined benefit plan accounting under current IFRS lacks clarity in some areas, according to stakeholder feedback received by the IASB.
To address this, the Board has proposed targeted amendments to IAS 19 and IFRIC 14 on two issues:
“Some may see major changes in the areas being clarified, particularly the requirement to recalculate current service cost and net interest in response to changes in the plan.”
Kim Heng, KPMG’s global IFRS employee benefits deputy leader
A pension trustee (or other third party) may have powers affecting the amount of a defined benefit plan surplus that can be recognised as an asset – i.e. when applying the asset ceiling.
The proposals clarify the effects of such third party powers as follows.
In addition, a third party’s power to buy annuities, or make other investment decisions without changing the benefits for plan members, does not affect the economic benefit available as a refund. This is because investment decisions relate to the amount of – not to the right to – a surplus.
The proposals clarify that if a plan amendment, curtailment or settlement occurs:
For example, if an entity undertook a plan amendment half way through the year, the current service cost and net interest for the remaining six months of the year would be recalculated. The new calculations would be based on the same actuarial assumptions used to remeasure the net defined benefit liability (or asset) for the amendment.
Read our comment letter.
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