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IAS 19 — Remeasurement at a plan amendment, curtailment or settlement

Date recorded:

The Technical Manager reminded the Committee that they had received a request to clarify the accounting treatment for issues related to the remeasurement of the net defined benefit liability (asset) (the ‘net DBL’) in the event of a plan amendment or curtailment in IAS 19. The Committee had tentatively agreed to develop an amendment to require an entity to take account of the remeasurement of the net DBL at the event date when determining net interest for the post-event period and use the updated actuarial assumptions for the calculation of current service cost and net interest for the post-event period. The Committee had decided that the proposed amendment fulfilled the criteria for the Annual Improvement Process. Several Committee members had asked whether an entity was also required to remeasure the net DBL if a significant market fluctuation had occurred. IAS 19 neither required nor permitted to remeasure the net DBL if a significant market fluctuation occurred during the annual period. However, the staff noted that IAS 19 required an entity to remeasure the net DBL if there was a material change in circumstances including changes in market prices and interest rates up to the end of the reporting period. Staff therefore proposed to modify the wording for the amendment.

One Committee member said that preparers would not see the reference quoted by staff as a remeasurement that occurred during a period. The reference was instead providing guidance on whether assumptions needed revision on a reporting date when an actuarial valuation had been performed before the reporting date. The reference in the standard was therefore only applicable on reporting dates. He would prefer amending the guidance in IAS 34 on calculation of pension costs as it already contained a reference to significant market fluctuations.

Another Committee member said that he agreed adjusting the fair value of the DBL in case of a curtailment but he disagreed updating all actuarial assumptions unless there was a material market fluctuation that affected all entities in the market to ensure comparability.

A Committee member was concerned about the cost implications of the proposed amendment. He said that every time a significant market fluctuation occurred, all remeasurements of the net DBL would have to be reflected in the income statement. This could prove costly in his view, as this also affected the segmentation of profits.

A fellow Committee member said that he would prefer going back to the original proposal which stated that if there was a remeasurement trigger, the remeasurement should include updated actuarial assumptions. He said that he would refrain from stating that significant market fluctuation was a remeasurement trigger.

An observing Board member said the issue was not a sweep issue to her and recommended forwarding it to the IASB.

The Director of Implementation Activities said that he had observed in the discussion that the reference in IAS 19 relating to remeasurement of the net DBL might be applied differently in practice. One Committee member replied that in his view, the reference was applied as written.

The Chairman asked the Committee which of its members supported to return to the original scope of the issue, i.e. event-driven situations excluding significant market fluctuations. All 14 members supported that.

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