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IAS 19 — Should longevity swaps held under a defined benefit scheme be measured at fair value as part of a plan asset or on another basis as a 'qualifying insurance contract'

Date recorded:

The Visiting Fellow opened the session by saying that the issue had been discussed at the November 2014 IFRS Interpretations Committee meeting. Based on the discussions, the Committee had tentatively decided not to add the item to its agenda. One comment letter had been received on the tentative agenda decision. The respondent suggested explaining that the requirement in IAS 19 to use the present value of the related obligation as the deemed fair value of plan assets only applied to a plan asset that met the definition of a qualifying insurance policy. Staff recommended including this explanation in the final agenda decision.

The Chairman summarised that firstly it should be determined whether a longevity swap was a qualifying insurance contract. If that was not the case, it should be accounted for like a plan asset. One Committee member said that the original question was whether a longevity swap should be separated into a qualifying insurance contract part and a plan asset part. In his view the added wording to the agenda decision meant that if a longevity swap was accounted for as a single instrument, it could not be measured at the present value of the related obligation although it was an economically similar instrument to qualifying insurance policies. He therefore disagreed with the additional paragraph proposed by staff. Another Committee member added that IAS 19 stated that a qualifying insurance policy would not necessarily have to be an insurance contract. A fellow Committee member agreed but said that it would still have to be a contract with an insurer.

The Chairman called a vote on the agenda decision without the added paragraph by staff. Eleven of the twelve Committee members present voted in favour of retaining the agenda decision without the additional paragraph.

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