The chair of the International Financial Reporting Standards Interpretations Committee (IFRS IC) has warned the committee is not a clearance service for company-specific accounting problems.
Her comments came as the IFRS IC voted to confirm its tentative agenda decision concerning the attribution of periods of service under International Accounting Standard 19, Employee Benefits (IAS 19).
Sue Lloyd said: “I think as a committee we try to be careful not to get into situations that are too fact-specific because our job isn’t really to come up with an agenda decision that somebody can take to the auditor and know what the accounting is for a particular fact pattern.”
The committee was not, she added, “trying to say to the submitter what the answer to their particular issue is” but instead to “assist preparers in reaching more consistent application in an area where guidance might be needed.”
The IFRS IC first discussed the issue at its December 2020 meeting when it concluded it would not add the issue to its work plan and instead published a draft agenda decision setting out its thinking on the issue.
An unnamed constituent invited the committee to consider a defined benefit (DB) pension plan where an employee is entitled to a lump sum accruing at a rate of one month’s salary for each completed year of service over a maximum of 16 consecutive years – provided the employee is in service at the date of retirement.
Crucially, an employee who worked for the entity for, say, four years, left their employment, and then returned for three years before retiring, would receive a benefit based on three years’ of service and not seven years.
Paragraph 70 of IAS 19 sets out the principles that govern the attribution of benefit to periods of service, while paragraphs 71–74 of the standard deal with how a sponsor applies that principle.
The IFRS IC draft agenda decision had a comment deadline of 15 February.
Complicating the situation, however, was a late clarification – detailed in paragraph 10 of the IFRS IC’s meeting paper – in which the submitter noted the potential impact of local labour laws.
Although committee members broadly agreed that the revised fact pattern was insufficient to prompt a rethink of their December agenda decision, some of them such as Betrand Perrin expressed concerns that the requirements of IAS 19 could be unclear.
His committee colleague Karsten Ganssauge added that he would support standard setting through the International Accounting Standards Board’s (IASB) annual improvements project to resolve the matter.
The wording of the final agenda decision remains subject to drafting changes ahead of its publication in the IFRS IC’s official journal, IFRIC Update.
Lloyd said staff would make sure the IASB was aware of the committee’s concern about the lack of clarity in the wording of IAS 19 that the project had highlighted.