IAS 19 — Attributing benefit to periods of service

Date recorded:

IAS 19 Employee Benefits—Attributing benefit to periods of service (Agenda Paper 3)


The Committee received a submission about the periods of services to which an entity attributes benefit for a particular type of defined benefit plan. In the fact pattern described, the employees are entitled to a lump sum benefit payable on retirement provided they are employed by the entity when they reach retirement (age of 62). The amount of the retirement benefit to which an employee is entitled depends on the length of service before the retirement and equals one month of final salary for each year of service capped at 16 consecutive years of service. There are three views on the attribution periods: View A—attributes the benefit from the date the employee starts working with the entity until the retirement date; View B—attributes to only the first 16 years of employee service; or View C—attributes to only the last 16 years of employee services. The staff opted for View C with their analysis applying IAS 19:70-74. The staff asked if the Committee agrees with the analysis and the recommendation not to add a standard setting project.

Staff analysis

The staff performed outreach to ascertain the prevalence of these schemes and which view is applied in practice. The feedback has shown such plans are common in France, Greece and Australia and exist in some other countries but are not that common. There is diversity in applying View A, B & C within the same countries and across different countries.

The staff were of the view that the analysis should be considered separately for employees who join the entity before the age of 46 and on or after the age of 46. For employees who join before the age of 46, the obligation arises only from the date when the employee reaches the age of 46 (16 years before the retirement age) because the number of years of future service the employee will have to render before the entitlement will reduce at the end of each reporting period. The staff further elaborated that if the staff leave and re-join before age of 46, the same retirement benefit would be granted to the employees. This supported the view that employee's service first leads to the benefits under the plan only at the age of 46 and this is consistent with example two of IAS 19:73. For employees who join on or after the age of 46, the obligation arises from the date employment commences because the amount of future services to be rendered by the employee reduces at the end of each successive reporting period. The staff also believe there is no basis to stop attributing retirement benefit for an employee before the employee reaches the retirement age because it is the employee's service from the date the obligation first arises by applying IAS 19:73.

The staff disagreed with View A because the employee service before the age of 46 does not reduce the number of years of service the employee will have to render before becoming entitled to the benefit and it affects neither the timing nor the amount of retirement benefit. Even in situations in which service in later years will lead to a materially higher level of benefit, IAS 19:70 requires an entity to attribute benefit on a straight-line basis from the date only when the service by the employee first leads to benefits, i.e. age of 46. The staff did not agree with View B if employees join before age of 46 applying the same argument under IAS 19:70. They considered it inappropriate to attribute to the first 16 years of service and stop before an employee reaches the retirement age.

Staff recommendation

Based on the above analysis, the staff concluded that the principles and requirements in amendments to IAS 19 provide an adequate basis to determine the periods of service to which the entity attributes retirement benefit described and not to add the matter to the Committee's standard-setting agenda.


Most of the Committee members agreed with the analysis and conclusion that View C applies to the fact pattern described. But some raised concerns that the publication may bring confusion because most of the respondents to the outreach opted for View A or B.

Some Committee members commented that people naturally start attributing the benefit starting from the commencement of employment in most retirement benefit plans by applying the basic principle in IAS 19:70,  which states that the future service condition is ignored, thus resulting in View A. But IAS 19:71 and example two in IAS 19:72 are important to understand in how to get to View C because they emphasise the year that the obligation first leads to the benefit, i.e. age of 46 in the unique fact pattern described. One Committee member suggested simplifying the fact pattern by stating that the vesting period is the last consecutive year of service before retirement age. The staff considered it is not appropriate to amend the fact pattern submitted.

A number of Committee members raised concerns that confusion may arise given that most people are applying View A or B. One Committee member asked if these people need to restate the figures after the publication of the agenda decision. The staff replied that the agenda decision would provide new insight and they expect it to be applied prospectively.

One Committee member suggested the word "retirement" in counting the number of years of services in the fact pattern would bring confusion because some employees may still be working after retirement age until their actual retirement. This may be misinterpreted to mean that benefit needs to be attributed continuously after the retirement age in that situation and therefore this committee member suggested to be make clear that it is referring to "retirement age", which is the point where benefit stops attributing applying IAS 19:73.

The Committee decided, by a majority vote of 12:2, not to add the matter to the Committee's standard-setting agenda. And 12 of the 14 Committee members agreed with some of the proposed drafting amendments to the agenda decision.


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