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Deloitte comments on IAS 19 proposals

  • Deloitte Comment Letter Image

29 Oct 2005

On 30 June 2005, the IASB proposed certain amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets and complementary limited amendments to IAS 19 Employee Benefits.

We have posted the Deloitte (PDF 33k). Yesterday, we posted our comments on the IAS 37 amendments (see story of 28 October 2005). The main points of our IAS 19 comments:

We question the need for piecemeal changes to IAS 19 Employee Benefits, a Standard that the IASB acknowledges requires significant revision. We acknowledge the existence of the IASB's Short-term Convergence project, however we believe constituents would be better served in this particular instance by having to deal with these amendments as part of a broader proposal addressing IAS 19 as a whole.

We question the relevance of the distinction between voluntary and involuntary termination benefits and disagree with the proposed change in the point of liability recognition. If, at the time that an entity offers benefits, the entity has committed itself (either legally or constructively) and raised a valid expectation on the part of the employee that it will fulfil its responsibility should the employee accept the offer, a liability has been created. The key issue is whether an employee is required to provide future services in return for the termination benefits (whether voluntary or involuntary), in which case those benefits should be recognised as the services are provided. We agree with the immediate recognition of termination benefits where these are not offered to employees in exchange for the employees' future service.

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