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Pension benefits that depend on asset returns

Date recorded:

Project update (Agenda Paper 29)

Background

In this session, the staff provided the Board with an update on the Pension Benefits that Depend on Asset Returns project. This is a narrow-scope research project designed to assess whether the Board can provide a cost-beneficial solution that addresses a measurement inconsistency that arises when applying existing requirements in IAS 19 Employee Benefits. The inconsistency arises because the variability (risk) in the future asset returns is reflected only in the cash flows and not in the discount rate applied to those cash flows.

The staff have held and are planning discussions with a range of stakeholders. The findings of the research project are currently planned to be provided in the second half of 2019.  The Board will then be asked to decide whether any future work is needed.

There were no staff recommendations or questions for the Board.

Board discussion

The Vice-Chair stated that she is concerned about being able to keep the scope contained after the discussion at the Accounting Standards Advisory Forum (ASAF). There were also some issues raised by ASAF for scenarios when the assets are held outside the entity. The staff were confident that they would be able to contain the scope and confirmed they would look at the issues raised by ASAF. One Board member highlighted that the US Financial Accounting Standards Board (FASB) have also looked into the issue and that the IASB could leverage from the FASB’s findings.

No decisions were made.

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