IAS 19 — Attributing Benefit to Periods of Service (Agenda Paper 2)

Date recorded:


In its December 2020 meeting, the Committee discussed a submission about the periods of service 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. Most of the Committee members agreed with the analysis and conclusion that View C applies to the fact pattern described.

Out of the ten comment letters received, five respondents agreed with the analysis and conclusion in the tentative agenda decision. Three respondents considered the conclusion reached in the tentative agenda decision is an acceptable interpretation of IAS 19 but should not rule out the possibility of attributing the obligation from the date of employment. A few of them said the fact pattern is incomplete and does not consider some relevant terms and conditions which may affect the conclusions.

Staff analysis

The staff first analysed the additional condition that the submitter made the staff aware of, that is the employment law in the submitter’s jurisdiction specifies that to be entitled to the retirement benefit an employee must also complete at least 15 years of services with the same or different employers by the specified retirement age (15-year condition). The staff considered that the 15-year condition does not change the analysis and conclusions regarding the date when (a) employee service first leads to benefits under the plan; and (b) further employee service will lead to no material amount of further benefits under the plan for employees joining both before age of 46 and on or after 46, provided the employee will have completed at least 15 years of services with the entity or previous employers by the age of 62. To avoid confusion, the staff decided not to add this additional condition to the fact pattern in the tentative agenda decision.

From the comment letters received, some respondents considered that it would also be appropriate to consider that an entity’s obligation arises from the date the employee joins the entity, regardless of the employee’s age, because the employer incurs the obligation from that date, even if the benefits are conditional on further service. Also, this is consistent with the overarching objective in IAS 19:1 to recognise an expense when the entity consumes the economic benefit arising from the services provided by the employee and would faithfully reflect the underlying economics and true costs of an employee’s service. However, the staff disagreed and said that an entity should determine the date when service first leads to benefits under the plan by applying IAS 19:70-74. They further explained that Example 2 of IAS 19, which illustrates IAS 19:73, does not permit or require the entity to attribute benefit over the entire period of employment for those who join before the age of 35 (in Example 2). Thus, the staff’s view in the tentative agenda decision illustrates an analogous fact pattern to the first part of Example 2.

A few respondents commented that the Committee’s analysis does not align with the last part of Example 2 where an entity attributes benefit to the entire period of service if the employee joins the entity at the age of 55 (in Example 2). The staff were of the view that the last part of Example 2 addresses a dissimilar fact pattern. That last part does not specify when service by the employee first leads to benefits under the plan and concludes that the benefits are provided in exchange for service from the age of 55 (the entire period of service). In contrast, the first part of Example 2 and the fact pattern in the submission do specify this.

Other respondents suggested to extend the fact patterns for other similar fact patterns which are common in several jurisdictions or adding additional terms and conditions as education material. However, the staff considered these are either not within the scope of the matter or not necessary because the fact pattern is already clear enough.

Staff recommendation

The staff asked whether the Committee agrees with the analysis of the effect of the 15-year condition. Also, whether the Committee agrees with the staff’s recommendation to finalise the agenda decision with changes to drafting suggested.


Most of the Committee members agreed that the additional 15-year condition does not change the Committee’s previous analysis and conclusion. One Committee member commented that the original 16-year condition requires consecutive years of services while the additional condition does not require this. This would result in starting to attribute the service from the time when the employee first joins the entity because every period of service counts towards the cumulative service of 15 years even if there is gap in between.

Some Committee members continued to take the view that the principle in IAS 19 is not clear to determine when to start attributing the period of service. It is not clear why IAS 19:70 is not relevant to determine the period to which the service is attributed and there is an inconsistency between the second part of Example 2 and its first part. One observing Board member explained that IAS 19:70 is talking about the pattern of attributing the service over a period while IAS 19:70A focuses on the period when service begins to be attributed and IAS 19:70B explains when the service stops being attributed. A few Committee members did not disagree with the outcome of analysis but considered it counterintuitive that the benefit does not begin to be attributed when the employee first joins the entity. Those who agreed with the analysis and the conclusion doubted the usefulness of issuing the agenda decision given the fact pattern described is not common and employee benefit plans are entity and jurisdiction-specific. On the other hand, the supporters of the agenda decision held the view that the agenda decision is clear in illustrating the underlying principle of IAS 19 as to when to start attributing services rendered by employees.

The Committee decided, by a majority vote of 10:4, to finalise the agenda decision with some suggested changes to wording. At the same time, the matter would be reported to the Board due to the complexity of IAS 19.

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