The narrow scope IASB project that led to issuing this ED arose out of requests made to the IFRS Interpretations Committee seeking clarification of paragraph 93 of IAS 19 Employee Benefits. That paragraph refers to the accounting for employee contributions set out in the formal terms of a defined benefit plan. The question was whether employee contributions in respect of service should in all cases be attributed to periods of service as a negative benefit in accordance with IAS 19 paragraph 70.

The IASB discussed the matter during its February 2013 meeting and came to the conclusion that contributions from employees or third parties that are linked solely to the employee’s service rendered in the same period in which they are paid may be treated as a reduction in the service cost and accounted for in that same period instead of attributing the contributions to periods of service in accordance with paragraph 70.

As an example for contributions that may be treated as a reduction in the service cost, the ED cites contributions that are a fixed percentage of the employee’s salary, where the percentage of the employee’s salary does not depend on the employee’s number of years of service to the employer.

The IASB also decided to specify in paragraph 93 that the negative benefit from employee contributions when these are not recognised as a reduction in the service cost in the same period in which they are payable is attributed to periods of service consistently with the application of the gross benefit in accordance with paragraph 70 in order to ensure consistent attribution of the net benefit.

If finalised, the amendments would apply retrospectively whereby the exact date will only be determined after exposure. Comments must be submitted to the IASB no later than 25 July 2013.

Please click for:

• IASB press release
• Access to the exposure draft on the IASB website
• Our IAS Plus project page on employee contributions to defined benefit plans