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Convergence Topics - Employee Pension Benefits

Date recorded:

The staff proposed that the scope of the project be expanded to consider amongst other matters:

  • The definition of plan assets.
  • Consolidation of plans.
  • Various measurement issues (in particular the use of fair value for liabilities).
  • Final vs Current salaries.
The staff believed that this would not delay the anticipated date of publication of an exposure draft as it had been agreed that this would only be done once an exposure draft on performance reporting was ready, and this will be towards the end of the year.

The Board noted that although these issues are, they cannot be resolved in the short term. Consequently the Board did not agree to expand the scope.

Regarding terminology, the Board agreed to used "plan liabilities" instead of obligations and "defined benefit asset or liability" to refer to the amount presented on the entity's balance sheet.

The Board discussed the criteria to be used to limit the amount recognised as an asset by means of the asset ceiling. It was proposed that the following should apply:

  • value the entity's rights to refunds and reductions in future contributions. If this is less than the surplus, then
  • value the entity's rights to fund increased benefits to current and future employees. No value should be ascribed to the entity's right to fund increased benefits to past employees. If these two items together are less than the surplus, then
  • value the entity's right not to fund future losses in the plan to the extent that the losses will be absorbed by the surplus.
There was considerable debate as to the merits of the third item above. This was particularly as a result of jurisdictional differences as to the allowed access to these amounts by entities. The Board finally agreed that the asset ceiling should be deleted (8-6), but after further discussion it agreed that an asset may be recognised only if it meets the definition of an asset and that the above criteria would be included as guidance.

The Board noted that a decision summary for the project as of 28 January 2003 date is posted Here (PDF 41k).

Correction list for hyphenation

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