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IAS 19 – Defined contribution plans with vesting conditions (new)

Date recorded:

The Committee considered a request to clarify the impact that vesting conditions have on the accounting for defined contribution plans. The question that has arisen is whether contributions are recognised as an expense in the period they are paid for or are they recognised over the vesting period.

The Committee discussed that, subject to paragraph 43 of IAS 19 Employee Benefits, the accounting for defined contribution plans means accounting for the reporting entity's obligation to the employees who benefit from the scheme. As such, the Committee read paragraph 44(a) of IAS 19 to mean that contributions to defined contribution plans are expensed or recognised as a liability when they fall due and refunds are recognised as an asset and income when the entity/employer becomes entitled to it, e.g. the employee failing to meet the vesting conditions.

The Committee agreed with the staff's position and noted there is no significant diversity in practice nor does it expect significant diversity in practice to emerge in the future. As such, the Committee decided to not take this project forward. A draft agenda decision would be issued explaining the rationale.