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The International Accounting Standards Board (IASB) today published for public comment a discussion paper on
IAS 19 Employee Benefits. The paper sets out the IASB’s preliminary views on how the accounting for some post-employment benefits, including pensions, could be improved.
The discussion paper, developed in consultation with the IASB’s Employee Benefits Working Group, addresses the main concerns expressed by a wide range of interested parties that the accounting model set out in IAS 19 is inadequate and should be reviewed. Constituents have pointed out that:
- the deferral of the recognition of gains and losses leads to misleading figures in the statement of financial position;
- the multiple options for deferring recognition lead to poor comparability across companies;
- the lack of clarity in the definitions of benefit promises lead to inconsistencies and poor comparability for those benefit promises that include a promised return on contributions linked to an asset or an index;
- the required measurement method is inadequate for those benefit promises that include a promised return on contributions linked to an asset or an index.
The IASB’s preliminary views on how to address those main issues are:
- to remove the options for deferred recognition of gains and losses in defined benefit plans
- to introduce a new classification of benefit promises into contribution-based promises and defined benefit promises, with a new measurement attribute for contribution-based promises
Introducing the discussion paper, Sir David Tweedie, IASB Chairman, said:
Accounting for pensions is a complex area of huge importance. The total liability for 80 of the top companies around the world alone is estimated to be around £700 billion. In some cases, the pension liability even exceeds the market capitalisation of the company. The financial statement of a company must provide investors, analysts and companies with clear, reliable and comparable information on a company’s pension obligations. It is in the interest of all of us to find ways to improve this area of financial reporting, and the discussion paper on post-employment benefits is the starting point.
The IASB invites comments on the discussion paper by
26 September 2008. For more details on the project, see the
project Web pages.
The IASB plans to redeliberate the issues and publish an exposure draft of proposed amendments to IAS 19, with a view to issuing a revised standard by 2011.
The discussion paper
Preliminary Views on Amendments to IAS 19 Employee Benefits is available for eIFRS subscribers from today and will be freely available on the Website from 7 April. Those wishing to subscribe to eIFRSs should visit the
online Shop or contact:
IASC Foundation Publications Department
30 Cannon Street,
London EC4M 6XH,
Tel: +44 (0)20 7332 2730
Fax +44 (0)20 7332 2749
Printed copies (ISBN 978-1-905590-62-9) will be available shortly, at £10.00 each plus shipping, from the IASC Foundation
Wayne Upton, Director of Research, IASB,
Telephone: 44 (0)20 7246 6449
Anne McGeachin, Senior Project Manager, IASB
Telephone: +44 (0)1225 426 517
Jenny Lee, Project Manager, IASB
Telephone: +44 (0)20 7246 6479