Chronology
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Important: The final revised IAS 19, Employee Benefits, has been issued by the IASB. The information on this page reflects the Board's discussions during the development of the revised IAS 19, and may include tentative decisions that were changed along the way. A summary of the final IAS 19 as adopted can be found Here.
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Background
The Board decided to revise IAS 19 to eliminate inconsistencies and complexities surrounding the accounting for post-employee benefit plans. The main paragraph identified for revision was paragraph 58, which can result in an actuarial loss being deferred on the balance sheet if there is a surplus in the pension fund. The corridor principle was also identified as complex. No decision was made on the solution to these issues.
Exposure Draft Published 25 February 2002
On 25 February 2002, IASB published an exposure draft of a proposed amendment to IAS 19, Employee Benefits, to prevent a counter-intuitive result produced by the interaction of two aspects of IAS 19 - the option to defer gains and losses in the pension fund and the limit on the amount that can be recognised as an asset (the 'asset ceiling'). Because of the wording of the asset ceiling, a gain is sometimes recognised solely as a result of deferring and amortising an actuarial loss or added past service cost in the current period. Conversely, deferral of actuarial gains sometimes causes a loss to be recognised. The IASB concluded that reporting gains and losses in these circumstances is not appropriate, and the proposed amendment would prevent their recognition. Comments deadline was 25 March 2002. Click to:
Deloitte Touche Tohmatsu submitted its comments on 19 March 2002. Click to download our Letter of Comments on the ED (PDF 15k).
Revised IAS 19 Approved April 2002
At its April 2002 meeting, IASB discussed the responses to the Exposure Draft. 34 responses were received. 21 of the responses agreed with the limited amendment. Seven were strongly against the amendment and they highlighted the need for a broader review of IAS 19 to look at the more underlying issues. A large proportion of all responses received requested that a more in depth review be performed on IAS 19. Many respondents felt that a 30-day comment period was not long enough for detailed responses to be given.
The Board concluded that this is a quick fix for a major issue that had been identified and the amendment would result in the improvement of IAS 19. The Board agreed to proceed with the amendment although they did recognise the need for a future review of other issues that existed within IAS 19 (namely the asset ceiling and smoothing of profits). The Board has agreed to make one change from the Exposure Draft, which was to add an extra paragraph clarifying the recognition of past service cost. Effective date will be the date of publication.
Revised IAS 19 Published May 2002
The IASB published the final 'asset ceiling' amendment to IAS 19 on 31 May 2002. The amendment prevents the recognition of gains solely as a result of deferral of actuarial losses or past service cost, and prohibits the recognition of losses solely as a result of deferral of actuarial gains.
This can happen if an entity has a surplus in a defined benefit plan and cannot, based on the current terms of the plan, recover that surplus fully through refunds or reductions in future contributions. In such cases, deferral of past service cost and actuarial losses that arise in the period will increase the cumulative unrecognised net actuarial losses and past service cost. If that increase does not result in a refund to the entity or a reduction in future contributions to the pension fund, a gain would have been recognised under IAS 19 prior to this amendment. This amendment, however, prohibits recognising a gain in these circumstances. The opposite effect arises with deferred actuarial gains that arise in the period. This amendment prohibits recognising a loss in these circumstances.
The amendment takes effect for accounting periods ending on or after 31 May 2002. Earlier application
is encouraged. Click for IASB Press Release (PDF 12k).
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