IFRIC Update (IASB only)
The staff presented the Committee’s November 2012 IFRIC Update newsletter, providing an update of the issues discussed at the 13-14 November 2012 Committee meeting.
The staff highlighted to the IASB members the items on the Committee’s current agenda, finalised agenda decisions, tentative agenda decisions that are out for comment, issues considered for Annual Improvements and other work in progress.
In response to the staff’s high-level overview, Board members raised certain questions or comments, as highlighted below:
At its November meeting, the Committee discussed the accounting for employee benefit plans with a guaranteed return on contributions or notional contributions; considering, amongst other measurement areas, the measurement of the ‘higher of option’ in employee benefit plans (i.e., employee guarantee of the higher of two or more possible outcomes). At its meeting, the Committee tentatively decided that the ‘higher of option’ should be measured at the intrinsic value at the reporting date. At the December IASB meeting, one Board member disagreed with this tentative conclusion. He noted that measurement at intrinsic value was not measuring the option at all – it is just reflecting the outcome that is expected to give the higher value at the reporting date. The staff will provide this feedback to the Committee.
The Board discussed the Committee’s deliberations on a request to clarify the determination of the rate used to discount post-employment benefit obligations; namely, clarification of whether corporate bonds with a rating lower than one of the two highest ratings could be considered a ‘high quality corporate bond’ (HQCB) as defined in paragraph 83 of IAS 19 (revised in 2011). The Committee believed that judgement is required in the determination of what the current market yields on HQCB are, but also noted that it does not expect that an entity’s method of determining the discount rate so as to reflect the yields on HQCB will change significantly from period to period other than to reflect changes in the time value of money and the estimated timing and amounts of benefit payments. At the December IASB meeting, one Board noted feedback to the Committee’s tentative decisions suggesting that it provided conflicting statements (use judgement, but the Committee does not expect significant change). The staff noted that it is considering the development of guidance in application of this judgement; however, it acknowledged that there may be mixed views on what the application guidance should communicate.