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IFRS for Non-publicly Accountable Entities (formerly SMEs and Private Entities)

Date recorded:

The Board discussed the simplification of defined benefit pension accounting. In the Exposure Draft (ED) of a Proposed IFRS for SMEs, the requirements proposed for defined benefit plans were similar to, but condensed from, those in IAS 19 Employee Benefits.

At the July and November 2008 meetings the Board considered, but did not support, staff proposals to measure the pension obligation at a current termination amount. The Board asked the staff to return with an approach that was more in line with the IAS 19 approach, but with simplified calculations that would reduce the need for non-publicly accountable entities to engage external specialists (such as actuaries). At this meeting the staff presented a revised approach, based on input from the IASB's Employee Benefits Working Group.

The Board made the following tentative decisions:

  • If information based on IAS 19 (using the projected unit credit method, etc.) is already available or can be obtained without undue cost or effort, a NPAE should use that method.
  • If information based on IAS 19 is not available and cannot be obtained without undue cost or effort, a NPAE would apply an approach based on IAS 19 but that does not consider future salary progression, future service, or possible mortality during an employee's period of service. This approach would still take into account life expectancy of employees after retirement age. The resulting defined benefit pension obligation would reflect both vested and unvested benefits. This would result in recognising something similar to the accumulated benefit obligation.
  • Clarify that comprehensive valuations would not normally be necessary more frequently than once every three years. In the interim periods, the valuations would be rolled forward for aggregate adjustments for employee composition and salaries, but without changing the turnover or mortality assumptions.
  • Add further guidance for entities that pay insurance premiums to fund a post-employment benefit plan (insured benefits).

The staff noted that tentative decisions had been reached on all substantive issues to be included in the IFRS. In March 2009, the Board will consider whether or not there is a need for re-exposure before a final Standard is issued.

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