Discount Rate in IAS 19: Transitional Provisions
The IASB held a meeting by teleconference to decide the transitional arrangements to be proposed for the amendment to IAS 19 with respect to the discount rate. All 15 members of the IASB were present on the call.
Basis of application
The Board agreed that the proposed amendments should be applied prospectively.
Where the adjustment should be recognised
The Board discussed whether the amount resulting from the change in accounting policy should be adjusted directly through other comprehensive income.
A Board member spoke strongly against the staff recommendation. He noted that the switch from the government bond rate to a high-quality corporate bond rate would (probably) lead to a smaller amount being deferred in the corridor and thus more items falling outside the corridor. The Board member would want to see a retrospective adjustment to the actuarial gains and losses recognised in the corridor.
Although several Board members had sympathy with this approach, a majority of the Board were willing to support the staff recommendation, more out of expedience rather than commitment.
Whether unamortised gains and losses are affected
The Board discussed what to do with unrecognised gains and losses that have accumulated up to the date of adoption. One approach would continue to carry them forward and amortise them. Another approach would reset them to zero (i.e., recognise all accumulated unrecognised actuarial gains and losses). The staff recommended that no adjustment would be necessary. A number of Board members were unhappy with the staff recommendation, but were willing to accept it, given that the forthcoming exposure draft of major amendments to IAS 19 would propose eliminating the corridor. It was noted that the example accompanying the staff recommendation was incorrect, which was unhelpful.
However, the Invitation to Comment would include the alternative proposed by a Board member and supported by a significant minority of the Board that would result in an adjustment of amounts deferred in the corridor as a result of the change in the discount rate methodology.
Date of application
The Board agreed that the proposed amendments should be applied in the normal manner for prospective accounting policy changes, that is, from the beginning of the earliest period presented. IAS 8 has an impracticability exemption, which could apply in this instance, if the necessary inputs to determine the adjustments are not available or observable.
Whether to amend IFRS 1
The Board agreed that no amendment of IFRS 1 was necessary.
The exposure draft will be prepared as quickly as possible - issuance expected second half of August 2009, with a comment deadline 30 September 2009.