Convergence – Post-employment Benefits

Date recorded:

A pre-ballot draft of amendments to IAS 19 Employee Benefits had been circulated, and the Board discussed some of the issues raised in respect of that draft. It was also noted that IFRIC members had been asked to conduct a fatal flaw review of the proposed amendments to IAS 19.

Disclosure of Cumulative Actuarial Gains and Losses Not Recognised in Profit or Loss

The pre-ballot draft required the disclosure of the cumulative amounts of actuarial gains and losses not recognised in profit or loss. A Board member had raised the point that this disclosure would incorporate amounts recognised directly in retained profits on transition to IAS 19. The Board agreed that this would reduce comparability of the disclosure, and therefore the requirement should be amended to mandate disclosure of the cumulative amount of actuarial gains and losses recognised in the statement of recognised income and expense.

Group Plans and Multi-Employer Plans

The Board discussed the inconsistencies in treatment of group plans and multi-employer plans under the revised draft. The Board agreed that in concept, information may not be available to a participant in a multi-employer plan, but a participant in a group plan should be able to obtain information on a consolidated basis that will fulfil the disclosure requirements proposed in the pre-ballot draft. It was noted that where one small subsidiary in a group is required by the jurisdiction in which it operates to prepare accounts under IFRS, this group may struggle to get IAS 19 information for the plan as a whole. In this instance an inability to obtain the information would necessarily result in a non-compliance with IFRS and therefore a likelihood of a qualified audit report. The Board acknowledged this but did not see it as a persuasive reason to relax the disclosure requirements.

Accordingly, for a group plan, where IAS 19 information is prepared at a consolidated level, a subsidiary should recognise its share of the net defined benefit cost for the plan as a whole in accordance with the contractual agreement or stated policy for charging the defined benefit cost if there is such an agreement or policy. Where no such agreement or policy is in place, the individual group entity that legally sponsors the plan shall recognise the net defined benefit cost and other entities within the group shall recognise a defined benefit cost equal to their contribution for the period. Some Board members expressed very strong views that this accounting allows entities preparing separate financial statements to manipulate their results, whilst others viewed this as no different from any other related party transaction (such as rent free premises for which rent income and expense is recognised by neither party to the transaction.

In either of these cases, the disclosure requirements of IAS 24 Related Party Disclosures apply. Furthermore, where the subsidiary recognises a defined benefit cost equal to their contribution for the period, additional disclosure requirements are triggered requiring certain information to be disclosed based on IAS 19 calculations for the plan as a whole.

Expected Rate of Return on Plan Assets

At its October 2004 meeting the Board agreed to remove a requirement to disclose the expected rate of return on plan assets by class of asset. Following on from feedback received, particularly from analysts, subsequent to that meeting, the Board agreed to reverse that decision and reinstate the disclosure requirement.


The Board should receive a ballot draft to vote on within the next week. Electronic publication of the amendments to IAS 19 is currently expected on 10 December 2004. Two Board members indicated that they would dissent from the making of the standard, and a third indicated that they had not yet decided but might dissent.

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