IAS 19 — Employee benefit plans with a guaranteed return on contributions or notional contributions

Date recorded:


In March 2012, the Interpretations Committee received a request to clarify the accounting for contribution-based promises in accordance with IAS 19 Employee Benefits.  The Committee made tentative decisions on the following:

  • The characteristics of employee benefit plans that fall within the scope of its work
  • Employee post- employment benefit plan or other employee long term benefits and the legal/constructive obligation aspects
  • Combined benefit promise that offers employees the higher of two benefit promises should be measured at its intrinsic value at reporting date.

At the July 2013 meeting Committee members found the proposals to be acceptable but there were concerns raised with regards to the scope. Staff were asked to consider possible alternatives in their analysis when measurement for the contribution based method such as insurance where liabilities provide return on assets and other similar treatments in the industry. Within the current scope there were some problems reported by Committee members such as there is a large population that has been excluded due to measurement anomalies arising from projecting forward and discounting back the value of an asset which would excludes  a large population as it would subject them to demographic risk. Also there may be a number of cash balance plans which would have an initial vesting period which again would be excluded from the scope proposed. There may also be some plain vanilla defined benefit plans that pay a fixed payment which would currently operate without any problems however would be caught within the scope of the proposal and hence the member suggested having narrative to exclude such prepares of financial statements.

Staff highlighted that this issue may have to return to the Committee as there will be various types of benefit promises which will have to be considered. The Committee concluded with uncertainties and therefore agreed to keep the scope as it is and to update the IASB on their findings and receive advice from the IASB on the need for any further work.

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