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IAS 19/IFRIC 14 —Stable workforce assumption

Date recorded:

The IFRIC considered a request to address an issue arising from IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction.

IAS 19 Employee Benefits limits the asset that an entity can recognise for a surplus in a defined benefit pension plan to the economic benefit available to the entity from both refunds from the plan and reductions in future contributions to the plan. IFRIC 14 gives guidance on how to determine that amount. The issue raised in the request related to the economic benefit available in the form of reductions in future contributions when there is a minimum funding requirement.

IFRIC 14 requires the economic benefit available as reductions in future contributions to be the present value of:

  • the future service cost to the entity for each year less
  • the estimated minimum funding contributions required in respect of the future accrual of benefits in that year.

In determining the future service cost, IFRIC 14 requires the entity to assume a stable workforce unless the entity is demonstrably committed to make a reduction in the number of employees covered by the plan.

The IFRIC agreed not to add this item to its agenda. The effect of the timing of voluntary contributions described in the request was not a new issue, and is an inherent part of the asset ceiling. The only question was whether the determination of the economic benefit available from reductions in future contributions was appropriate. The IFRIC discussed this at length when developing IFRIC 14, and the request provided no new information on this point that was not considered at the time. A Tentative Agenda Decision will be issued in the forthcoming issue of IFRIC Update.

In analysing the issue submitted, the staff identified another potential issue, dealing with the demographic assumptions of a 'stable workforce'. They will explore these issues further and report to the IFRIC at a later meeting.

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