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IASB continues its comedy of errors

Further deliberation of the International Accouting Standards Board's (IASB) preliminary views on pensions accounting kicked-off pretty much as we would expect, with staff failing to meet a self-imposed deadline, and a dose of unnecessary secrecy.

The plan, said Andrea Pryde, on 19 November, was to "present an overview of the [constituent] comment letters in December and ask you to redeliberate the issues from January to July next year, so we are one month early".

Pryde continued: "For next month we will be bringing issues for discussions starting with the scope of the exposure draft and recognition and presentation of the defined benefit obligation." But pensions accounting is not on the December board agenda, so they are one month late.

As for the secrecy, the staff omit from the November board paper at paragraph 2 the minutes of the June working group meeting. As previously reported in IPE, an informal Deloitte meeting summary revealed that the staff team summed the group's view that the board's controversial new contribution-based plan definition is "still flawed".

To a request for a copy of the minutes, staff responded that: "In the case of the employee benefit working group meeting, staff notes were prepared as an informal feedback mechanism for board members. They were not produced as formal minutes as the working group members were not asked to review and approve them prior to publication. As such, it would not be appropriate to make them publicly available."

Staff also noted that "observers are encouraged to attend", which meant during June that a German constituent would have to shuttle between Frankfurt and London for a Standards Advisory Council meeting, on to Amsterdam for Anne McGeachin's IASCF conference pensions presentation, and back to London for the working group.

Whatever the determination with which the staff have withheld information across IAS19 and IAS12, the debate about who knew what and when continues to rage.

At paragraph 32 of the November minutes, staff note that: "It is clear that many more plans are affected than was originally envisaged. We were already aware of this when we published the discussion paper." But when asked by board member Mary Barth whether the comment letters contained any fresh considerations that the board had not previously taken into account, Andrea Pryde responded: "We hadn't realised entirely how wide-ranging the definitions would actually be, how many plans it would actually affect … so that's new for us."

This stuff is a master class in one of the foundations of effective cross-examination, for example, highlighting previously inconsistent statements. Regular followers of IPE's IASB coverage might well recall the surprise with which Jenny Lee received the news at a DRSC-hosted pensions forum in Frankfurt on 3 June last year that "99% and up" of Bayer AG's pension provision would shift to the new fair value measurement and presentation model. Having reviewed the IPE recording of that meeting, her surprise is no less palpable today than it was then when she asked Bayer's Rolf Funk: "Can I ask why that is?" It was a pretty good impression of someone who did not appear to know.

The critical issue of presentation - where the various aspects of a pension expense go in the financial statements, and more specifically how they affect earnings - remains an open wound. The board proposed an all-in-profit-or-loss approach for its new contribution-based definition, which has gone down like a lead balloon.

Now, it seems, the board thinks it might be a smart move to carry presentation forward not on the basis of it being a free-standing component of pensions accounting, rather by aligning the presentation of pension obligations with the rest of International Financial Reporting Standards (IFRS).

"Well it really does worry me," IASB member Warren McGregor said of the newly in-vogue co-ordination. If only it had troubled him and other board members sooner.

And where the components go, might well now turn out to be an accounting policy choice. Stephen Cooper thought not, because when he raised the issue with staff - in private - they argued that a pension obligation under IFRS does not meet the definition of a financial liability.

"I don't believe the staff is correct," retorted Jim Leisenring.

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