IAS 19 — Distinction between curtailments and past service cost


Whether plan amendments that reduce benefits are accounted for as curtailments or as negative past service costs.

In particular, they deliberated which of the following views would be in compliance with IAS 19 Employee Benefits (1998):

View A:

  • Any plan amendment should be considered in its entirety. If an impact of the amendment is to reduce the benefits for future service then the amendment meets the definition of a curtailment. IAS 19.98(e) excludes the impact of curtailments from the definition of past service cost. Therefore the full impact of any plan amendment which reduces benefits for future (and past) service should be accounted for as a curtailment.

View B:

  • Follow view A but apply this at the individual member level rather than for the plan as a whole. Therefore the impact for any retiree, terminated, or active member who has passed the date when further service leads to no material amount of further benefits (as specified in IAS 19.67(b)) should be accounted for as a negative past service cost whilst the impact for other active members should be accounted for as a curtailment.

View C:

  • The reference in IAS 19.98(e) should be read as excluding only future service impact when considering a curtailment. Therefore the impact of any plan amendment should be broken down into elements which relate to past service (for example, accrual rate) and elements which are dependent on future service (eg the impact of future salary increases included in the defined benefit obligation or the impact on the calculation of the defined benefit obligation of straight lining a benefit accrual which includes a back end load in accordance with IAS 19.67). Having bifurcated the plan amendment into mutually exclusive past and future service elements, negative past service cost or curtailment accounting treatment is applied for the respective elements.


Current status of the project

IFRIC removed this topic from its agenda in May 2007. The issue was dealt with as part of the IASB's 2006-2008 cycle of annual improvements.


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