The Board discussed the only remaining issue in its project to develop an IFRS for non-publicly accountable entities (formerly private entities or small and medium-sized entities): simplification of defined benefit pension accounting. In the exposure draft of a proposed IFRS for SMEs the requirements proposed for defined benefit plans were similar to, but condensed from, those in IAS 19 Employee Benefits.
At its meetings in July and November 2008 the Board considered, but did not support, staff proposals to measure the pension obligation at a current termination amount. The Board asked the staff to bring to a future meeting an approach that is more in line with the current IAS 19 approach, but with simplified calculations that would reduce the need for non-publicly accountable entities (NPAEs) to engage external specialists. At this meeting the staff presented a revised approach, based on input from the IASB�s Employee Benefits Working Group.
The Board made the following tentative decisions:
- If information based on IAS 19 (projected unit credit etc.) is already available or can be obtained without undue cost or effort, an NPAE should use that method.
- If information based on IAS 19 is not available and cannot be obtained without undue cost or effort, an NPAE would apply an approach that is based on IAS 19 but does not consider future salary progression, future service, or possible mortality during an employee�s period of service. This approach would still take into account life expectancy of employees after retirement age. The resulting defined benefit pension obligation would reflect both vested and unvested benefits.
- Comprehensive valuations would not normally be necessary more than once every three years. In the interim periods, the valuations would be rolled forward for aggregate adjustments for employee composition and salaries, but without changing the turnover or mortality assumptions.
- Further guidance would be added on insured benefits.
The Board has now made tentative decisions on all substantive issues. At its meeting in March, the Board will consider whether there is a need for re-exposure before a Standard is issued.