Post-employment benefits

Disclosures

The Board discussed certain disclosure issues in the exposure draft (ED) of proposed amendments to IAS 19:

Staff recommended that further information be disclosed about plan assets (by major asset class, including the expected rate of return), although US GAAP does not have a similar requirement (SFAS 132). Staff noted that this disclosure is required by UK GAAP.

There was some debate regarding the usefulness of this disclosure, particularly for multi-national entities considering that different expected rates of return would prevail at country/jurisdiction level and not necessarily at the 'major asset class' level. Aggregation of information to the major asset class level would negate the usefulness of the disclosure.

The Board voted 8 to 6 against the staff recommendation; therefore the disclosure will not be required in IAS 19.

There was general support for the requirement of sensitivity information about medical cost trends. SFAS 132 requires this disclosure. Board members made the point that the focus when considering this disclosure, should be based on the materiality of medical costs in the context of the entity. Staff were asked to make this clear in the drafting together with the fact that specifying a 1% change would be inappropriate in jurisdictions with high inflation. Subject to these amendments, the Board voted 13 to 1 for this requirement to be included in IAS 19.

The ED proposed the disclosure of the amounts for the current period and previous four periods of the present value of the defined benefit obligation, the fair value of the plan assets, the surplus or deficit in the plan, and the experience adjustments arising on the plan assets and liabilities. SFAS 132 does not require these disclosures. FRS 17 in the UK does. Staff recommended that this requirement not be included in IAS 19.

General discussion ensured with Board members making the points that:

• the requirements were viewed as information overload;
• the UK requirement was intended to be an anti-avoidance type mechanism that would guard against preparers achieving a certain accounting outcome in certain years but reversing that in subsequent years;
• there would be no significant additional cost to preparers for providing this information as it is required for each year (the ED proposes that the preparer merely provides a summary of the current year together with the past four periods; information which should be readily available from its previous financial statements). The point was made that it would be logical that the preparer extracted this information and not the user.

The Board voted 13 to 1 against the staff recommendation; therefore IAS 19 will contain this disclosure requirement.

Group Plans

The ED proposed that, in their separate or individual financial statements, group entities that met specified criteria could treat group plans as multi-employer plans. Group entities that did not meet the criteria should apply defined benefit accounting using a reasonable basis of allocation. Subsequent to the September discussions, the staff recommended that IAS 19 be amended to require defined benefit group plans that share risks between individual group entities to be accounted for in the separate or individual financial statements of the group entities as follows:

• by measuring the plan in accordance with IAS 19 based on assumptions applicable to the plan as a whole (it is assumed that this information will generally be available to the group as a whole); and
• allocating the plan to individual group entities in accordance with the current agreement or stated policy for charging out the net defined benefit cost, if there is such an agreement or policy; or
• if there is no such agreement or policy, to the individual group entity that is legally the sponsoring employer for the plan.

The Board noted that the staff proposal would be problematic but agreed with the recommendation, to9 be supported by additional disclosure requirements, as the best solution at this point.

Multi-Employer Plans

IFRIC's concerns about the draft interpretation D6 were relayed to the Board - primarily measurement and allocation difficulties. The point was made that the accounting for group plans and multi-employer plans should be consistent. The Board decided to make a clarification through its project on amending IAS 19 (not an amendment) that where there is an agreement, the allocation for accounting purposes under a multi-employer plan should be on the basis of that agreement provided the information is available.