According to CCH, the agreement came following a review on October 19-22, 2010, of comments received on an exposure draft of proposed amendments to its IAS 19 Employee Benefits that would become effective January 1, 2013 (see IASB Proposes Pension Accounting Changes). Comments on the exposure draft were due to the IASB by September 6, 2010.
The changes to IAS 19 would require entities to:
(1) immediately account for all estimated changes in the cost of providing benefits;
(2) immediately account for all changes in the value of plan assets;
(3) use a new presentation approach that would clearly distinguish between different components of the cost of benefits; and
(4) disclose clearer information about the risks arising from defined benefit plans.
According to CCH, the exposure draft does not address contribution-based plans, and the IASB notes that it will consider whether or not to further its proposals about such plans after it completes the current project.
CCH notes that, after discussing the comment letters received on the exposure draft and proposals relating to recognition and disaggregation, the IASB tentatively confirmed the following proposals in the exposure draft:
- an entity should recognize all changes in the net defined benefit liability (asset) when they occur.
- an entity should recognize unvested past service cost when the related plan amendment occurs.
- an entity should disaggregate changes in the net defined benefit liability (asset) into service cost, finance cost and remeasurement components. The Board will discuss at a future meeting whether an entity: should present those components in profit or loss or in other comprehensive income; should distinguish those components on the statements of profit or loss and other comprehensive income; or whether disclosure in the notes would be sufficient.
- the service cost component should exclude gains and losses arising from changes in the assumptions used to measure the service cost.
- the finance cost component should comprise net interest on the net defined benefit liability (asset), determined by applying the same rate used to measure the defined benefit obligation to the net defined benefit liability (asset).
The IASB also confirmed a previous tentative decision to include in the definition of termination benefits only benefits provided in exchange for termination of employment. During its November meeting, the IASB said it planned to discuss the presentation of the service cost, finance cost and remeasurement components; disclosures for defined benefit plans; classification of employee benefits; and accounting for settlements and curtailments. The IASB expects to issue a final standard in 2011.