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Post-employment Benefits

Date recorded:

Service cost

The Board considered whether changes in the estimate of service cost should be included in the remeasurement component of changes in the net defined benefit asset or liability.

Several Board members were concerned by this proposal, as it would present service costs in the profit or loss and the remeasurement component of them in other comprehensive income (OCI). Another Board member was concerned that remeasurement component of the service costs was to be presented in earnings as it would mean that the effect of the estimated changes in salaries that include effects of inflation would be presented in profit or loss whereas the effect of changes in discount rate including inflation component as well would be presented in OCI.

After a short debate the Board decided that changes in service cost caused by changes in all assumptions should be presented in the remeasurement component in OCI. The Board also asked the staff to consider a requirement for an additional disclosure that would disaggregate effects of changes in the assumptions and their combined effects.

Interest income on plan assets

The Board rediscussed the accounting treatment of the interest income on plan assets discussed in November 2009. Most of the Board members were concerned with the staff proposal that en entity should be required to calculate and recognise in profit or loss an expected return on plan assets. Those Board members believed that it would lead to all the good news (overoptimistic expected return on plan assets and overoptimistic estimate of the pension liability) presented in profit or loss and all the bad news presented in other comprehensive income.

After a considerable discussion in which a wide variety of opinions were expressed, the majority of the Board adopted the 'net interest approach' that would require interest to be determined by applying the high quality corporate bond rate to the net defined benefit asset or liability and presented in profit or loss.

Correction list for hyphenation

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