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Post-employment Benefits

Date recorded:

In July 2006 the Board decided to form a working group on Employee Benefits which would help the IASB by providing practical input on ideas, concepts and proposals developed by the IASB.

At its November meeting the Board discussed two papers that consider revisions to IAS 19 that are intended to provide short term improvements to the standards. These papers and the recommendations would be discussed with the working group in due course.

The intention of this session was for the Board to give preliminary views on what the staff should explore in a future Discussion Paper.

Recognition of changes in defined benefit pension plans

Actuarial gains and losses

The Board discussed whether actuarial gains and losses from changes in actuarial assumptions should be recognised in full in the period in which they occur. This deals only with the issue of recognition, not where to recognise the gains and losses.

The Board agreed that all actuarial gains and losses should be recognised immediately when they occur, and that no gains and losses should be deferred.

Past service cost

Next the Board discussed whether unvested past service costs should be recognised immediately (vested past service costs are already expensed immediately according to IAS 19).

All Board members supported the proposal to require all past service costs, including unvested service costs, to be recognised immediately.

Presentation of changes in defined benefit pension plans

The previous paper presented to the Board considered whether changes in defined benefit plans should be recognised immediately or not, while the second paper considered how these gains and losses should be presented when recognised. The Board discussed whether gains and losses on the following items should be recognised directly in profit and loss when they rise.

  • Service costs (past and present)
  • Interest cost
  • Return on plan assets
  • Actuarial gains and losses

Three different alternatives were presented to the Board:

  • The staff recommendation that all components should be recognised directly in profit and loss.
  • A second alternative which would recognise all components, other than changes in fair value of plan assets, in profit and loss. Changes in fair value of plan assets would be recognised in other recognised income and expense.
  • A third alternative that would only require past and present service cost to be recognised in profit and loss.

As a preliminary view the majority of Board members indicated that all components should be recognised directly in profit and loss when they rise.

However, from the perspective of a the Discussion Paper, Board members said that if it was going to present alternatives (such as the alternatives above) they would have to be worked through in such a way that they are alternatives that the Board would consider if respondents were negative to the Board's initial proposal (ie that they not just are alternatives to give alternatives).

The Board decided that the staff should explore further the alternatives set out by the staff, and that the Board at a later meeting would decide whether to include these as alternatives in a Discussion Paper.

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