The proposals would amend the accounting for defined benefit plans through which some employers provide long-term employee benefits, such as pensions and post-employment medical care. In defined benefit plans, employers bear the risk of increases in costs and of possible poor investment performance.
The ED proposes improvements to the recognition, presentation, and disclosure of defined benefit plans. The ED does not address measurement of defined benefit plans or the accounting for contribution-based benefit promises.
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Among the amendments proposed to IAS 19 are:
- Immediate recognition of all estimated changes in the cost of providing defined benefits and all changes in the value of plan assets. This would eliminate the various methods currently in IAS 19, including the 'corridor' method, that allow deferral of some of those gains or losses.
- A new presentation approach that would clearly distinguish between different types of gains and losses arising from defined benefit plans. Specifically, the ED proposes that the following changes in benefit costs should be presented separately:
- service cost – in profit or loss
- finance cost (ie, net interest on the net defined benefit liability) – as part of finance costs in profit or loss
- remeasurement – in other comprehensive income
The effect of presenting these items separately is to remove from IAS 19 the option for entities to recognise in profit or loss all changes in defined benefit obligations and in the fair value of plan assets.
- Improved disclosures about matters such as:
- the characteristics of the company's defined benefit plans
- the amounts recognised in the financial statements
- risks arising from defined benefit plans
- participation in multi-employer plans
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Comment deadline on the ED
Defined Benefit Plans is 6 September 2010. Click for
IASB Press Release(PDF 100k).
