Comments on tentative agenda decisions

IAS 19 Employee Benefits—Attributing Benefit to Periods of Service: In December 2020, the Committee discussed the periods of service an entity attributes the benefit for a defined benefit plan when the amount of the retirement benefit to which an employee is entitled depends on the length of services before retirement. The Committee concluded that the entity attributes the period of service to only the last 16 years of employee services. A number of respondents commented that the Committee should not rule out the possibility of attributing the obligation from the date of employment applying the overarching objective in IAS 19:1.

The staff continue to support their view through analysis of these comments and conclude that the agenda decision should be finalised with some changes.

IAS 1 Presentation of Financial Statements—Classification of Debt with Covenants as Current or Non-current: In December 2020, the Committee discussed the informal feedback and enquiries received concerning the different interpretations arising from the application of recent amendments to IAS 1 related to the classification of liabilities. In the meeting, the Committee members generally agreed with the analysis of how an entity determines whether it has "the right to defer settlement" when a long-term liability is subject to a condition and its compliance with the condition is tested at dates after the reporting date, applying the amended IAS 1, in the three cases described. However, almost all of the respondents expressed concerns about the outcome of applying the IAS 1 amendments and suggested the matter be referred to the Board.

The staff recommend reporting the matter to the Board but at the same time, asks whether the Committee wishes to finalise the agenda decision in view of the fact that that the principles and requirements in IFRS Standards provide an adequate basis for the conclusion reached in the three cases described in the fact pattern.

IFRS 9 Financial Instruments—Hedging Variability in Cash Flows due to Real Interest Rates: In December 2020, the Committee discussed whether a hedge of the variability in cash flows arising from the changes in the real interest rate could rebut the presumption in IFRS 9:B6.3.13 and be accounted for as a cash flow hedge. The Committee members generally agreed with the staff's conclusion that hedge accounting cannot be applied to the inflation swap in the fact pattern described. Half of the respondents to the tentative agenda decision did not agree with the discussion explaining that cash flow hedge accounting could not be applied. The staff analysed the reasons for the disagreement and continue to support the conclusion in the agenda decision. The staff recommend the agenda decision be finalised.

Work in progress: The staff are analysing requests related to the accounting for power purchase agreements in a gross pool electricity market.

The full agenda for the meeting and our com­pre­hen­sive pre-meet­ing summaries can be found here.