The IASB continued its discussion of the proposals in the exposure draft Defined Benefit Plans (the ED) relating to accounting for risk sharing features.
Classification of post-employment benefit plans
The Board tentatively decided to clarify that for a plan with a benefit formula to be classified as a defined benefit plan, the benefit formula needs to give rise to a legal or constructive obligation that may require the employer to pay additional contributions as a result of current or past service beyond any contributions already paid for that service. All Board members present at the meeting supported this decision.
Accounting for risk-sharing features in defined-benefit plans
The Board tentatively decided:
- to clarify that the benefit to be attributed in accordance with paragraph 67 of IAS 19 is the benefit net of the effect of the employee contributions;
- to confirm the proposal that the effect of employee contributions should be deducted in determining the defined benefit obligation, but to withdraw the proposal that the effect of employee contributions should always be presented as a reduction in service cost;
- to clarify that the conditional indexation should be reflected in the measurement of the defined benefit obligation, regardless of whether the indexation or changes in benefits are automatic or are subject to a decision by the employer, by the employee, or by a third party such as trustees or administrators of the plan; and
- to clarify that if there exist any limits on the legal and constructive obligation to pay additional contributions, the effect of those limits should be included in the calculation of the defined benefit obligation.
All Board members present at the meeting supported these decisions.
In addition, the Board decided to confirm the proposal that the assumptions used to estimate conditional indexation or changes in benefits should be compatible with the other assumptions used to determine the defined benefit obligation. Two Board members present at the meeting did not support this decision
In the Board meeting for the week beginning 14 February, the IASB intends to discuss the effective date and transition requirements for the amendments to IAS 19.