Deloitte comment letter on the IASB's proposed changes to defined benefit plan accounting

  • Deloitte Comment Letter Image

06 Sep, 2010

Deloitte's IFRS Global Office has submitted a letter of comment to the IASB on exposure draft ED/2010/3 Defined Benefit Plans - Proposed Amendments to IAS 19 Employee Benefits, which was published in April 2010.

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. Key proposals include the elimination of the 'corridor' approach for accounting for pensions, splitting of gains and losses on defined benefit plans (and other long-term employee benefits) into three components with remeasurements being presented as part of other comprehensive income (OCI), and new disclosures.

Below is an excerpt from the comment letter:

We support the Board’s proposal to eliminate the option to defer recognition of changes in defined benefit assets and liabilities because the current deferred recognition represents a smoothing mechanism that often fails to capture and present relevant information on the status of the defined benefit plans. Further, the deferred recognition approach is inconsistent with the definition and recognition criteria of assets and liabilities in the Framework and it represents a source of complexity within IAS 19.

However, we do not support introducing other proposed changes, including a new presentation method, the elimination of the expected rate of return on plan assets and changes in definitions of employee benefits, in this short-term project. We believe these issues should be reconsidered as part of the Board’s planned fundamental review of the accounting for employee benefits and some should be timed to coincide with the Financial Statement Presentation Project (FSPP) which we would expect to address what is financial performance, what is other comprehensive income (OCI) and why, when and how amounts recognised in OCI are recycled to profit or loss. Therefore, until the completion of these projects, we support the status quo with respect to many of the issues addressed in the ED.

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