Availability of a refund (Amendments to IFRIC 14)—Update and next steps (Agenda Paper 12A)

In 2015, the IASB published ED/2015/5 Remeasurement on a Plan Amendment, Curtailment or Settlement/Availability of a Refund from a Defined Benefit Plan (Proposed amendments to IAS 19 and IFRIC 14).

In 2018, the IASB published final amendments to IAS 19 on the part of the ED that clarified the calculation of current service cost and net interest for the remainder of an annual period when a plan amendment or curtailment occurs.

Amendments regarding whether a trustee's power to augment benefits or to wind up a plan affects the employer's unconditional right to a refund and thus, in accordance with IFRIC 14, restricts recognition of an asset have not been finalised.

At a previous meeting, the Board decided to perform further work before proceeding to finalise the proposed amendments. That is because the staff’s work on the availability of a refund has identified that existing requirements in IFRIC 14 create a rather arbitrary line between substantively different measurements of an entity’s right to a refund or a surplus. The Board wanted a more principles-based approach.

The staff performed further work and, as a result, see little benefit in finalising the proposed amendment. If finalised, it would lead to consistent outcomes for defined benefit plans with the same terms and conditions, however, non-substantive changes to those would change the outcome. The staff also sees little benefit in finalising the other aspects of the proposed amendments, if the availability of a refund amendment is not finalised.

A wider-scope project might be able to develop a more principles-based approach to address the measurement of a right to refund of a surplus. However, this would require considerable time and effort. The 2020 Agenda Consultation will provide constituents with an opportunity to inform the Board whether it should undertake a wider-scope project on IFRIC 14.

Staff recommendation

The staff recommended that the Board not finalise the proposed amendments to IFRIC 14. The Board could consider referring to a project on IFRIC 14 as a potential project in the Request for Information to its 2020 Agenda Consultation.

Discussion and voting

Board members agreed with the staff’s recommendation not to finalise the proposed amendments to IFRIC 14.

However, the idea of adding the issue, in its current form, to the Agenda Consultation led to much discussion. A number of Board members feel that the issue should not be discussed further and should be removed from future Board activities given its narrow scope and the minimal population it affects.

Others members feel it should be added to the Agenda Consultation paper along with other currently incomplete projects.

It was questioned whether the issue as formulated was properly described and whether further analysis or clarification of the issue itself and the scope in which it is to be considered was required before further decisions are made.

The Board was asked to vote on the following:

• Whether they agree with the staff recommendation not to finalise the proposed amendments to IFRIC 14. 13 members voted in favour with one absent
• Whether the project should ‘end at this meeting’ with no further action taken. Six members voted in favour, seven against with one absent.
• Given the previous vote, whether the issue should be added to the Agenda Consultation paper. Five voted in favour, eight against with one absent.

Given that voting did not lead to a final decision, it was proposed to await the Agenda Consultation paper being presented to the Board (excluding this matter). Thereafter, analysis of whether this issue, in some form, should be included therein can take place.