Post-employment benefits
Project scope and timing
The staff presented papers outlining a proposed scope on the future work that arises from the Discussion Paper Amendments to IAS 19. Staff proposed to split the project in three parts and prioritise the items in order of importance. Each project section would result in a separate exposure draft. The proposed split was:
- Recognition, presentation and related disclosures
- Contribution-based promises
- Comprehensive review of disclosures
Board members were not convinced that the proposed approach would be appropriate and wanted to know the key risks that led to the proposed schedule. Some Board members preferred a more comprehensive approach.
The Board agreed to reduce the three step approach to a two step approach:
- Recognition, presentation, and related disclosures and minor issues
- Accounting for contribution-based promises
The minor issues encompass:
- Additional guidance on the discount rate
- Multi-employer exemption
- Attribution to periods of service when benefits are back end loaded
- Accounting for plans with risk sharing or conditional indexation features
- Definition of short and long term employee benefits
- Tax relating to pension costs
Presentation of changes in defined benefit obligations and in plan assets
The staff presented its proposals on the following three questions:
- Should the Board specify how the components of pension cost should be disaggregated?
- Should any components of post-employment benefit cost be presented in other comprehensive income rather than profit and loss? If so, which?
- Should the Board require such disaggregated components to be displayed on the face of the performance statements when material?
The Board agreed with the staff recommendation that pension cost should be disaggregated into employment, financing, and remeasurement components.
The Board discussed at length whether all components of pension cost should be recognised in profit or loss. Some Board members acknowledged that this will not be well received by some constituents and that the case for profit or loss recognition was weakened by the fact that the measurement model in IAS 19 was flawed. The chairman took a vote, and the Board agreed that all components should be recognised in profit or loss.
The staff recommended to the Board not to mandate disaggregation of the changes in the pensions obligation in the performance statements. The Board decided, however, to require this disaggregation. The agenda papers contained an example on how such disaggregation might be presented. It was found that the proposed presentation would require amendments to IAS 1. The staff was directed to consider the example again and bring back a new example at a future Board meeting.
Proposed amendment to IFRIC 14
The staff presented a proposed amendment to IFRIC 14 to clarify the accounting where an entity makes voluntary prepaid contributions and there is a minimum funding requirement. The staff recommended an approach that would treat the prepayment as partially recoverable. However, many Board members felt that the whole of the prepayment is recoverable and, hence, full recognition of the prepayment was appropriate. The chairman took the vote and the Board agreed. The amendment is to be exposed in due course.
