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IASB member discusses pensions accounting

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Feb 13, 2015

On February 13, 2015, in a report issued by the Financial Director, International Accounting Standards Board member Stephen Cooper provided an explanation on the current state of pensions accounting as well as the reason why potential changes are being considered.

Mr Cooper began by stating that IAS 19 focused on more on pension expense presentation rather than measurement and that the guidance caused confusion in practice due to the ‘corridor approach’. To address this issue, he commented that a change was made to the presentation requirements when reporting remeasurements of the net pension asset or liability in other comprehensive income, which essentially removed the ‘corridor approach’. In addition, he noted the positive response from the field on another change related to the removal of the expected return on assets from the income statement.

However, Mr Cooper emphasized that additional changes may be needed due to constant changes in the market. An example of a change currently being researched by the IASB are the challenges with hybrid pension schemes and whether they fall into the defined contribution category or a defined benefit. He mentioned that a more reasonable approach of handling issues with hybrid pension schemes may be to develop a more general model that encompassed all pension schemes.

For more information, see the report on the IASB’s website.

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