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IASB issues multi-employer pension guidance

GLOBAL – The International Accounting Standards Board has issued draft guidance on accounting for multi-employer pension schemes.

The new guidance, “Draft Interpretation D6”, has been issued by the IASB’s International Financial Reporting Interpretations Committee.

It deal with the way that entities that participate in defined benefit plans that have more than one participating employer, and who share actuarial risks, should comply with the employee benefits standard IAS19.

It said: “D6 requires participants to make every practicable effort to apply defined benefit accounting.”

“This is to be done by measuring the plan’s assets and liabilities on the basis of assumptions appropriate for the plan as a whole and allocating the plan, if possible, so that a participant recognises an asset or liability that reflects the extent to which the surplus or deficit in the plan will affect its future contributions.”

It added that if participants cannot analyse the change in the surplus or deficit into the cost components required by IAS19, then they should recognise its share of the surplus or deficit in the balance sheet and recognise the total change in value of its share immediately in profit or loss.

The proposals are in response to a concern that IAS19 is being interpreted to allow all participating entities in multi-employer plans an automatic exemption from defined benefit accounting.

The committee is seeking comment on its proposals by July 9.

Meanwhile, Watson Wyatt have released a briefing note on what IAS19 means for UK companies. It said: “For UK and Irish companies, the transition to IAS19 has already been largely foreshadowed by the existing requirement to make pension disclosures under the FRS17 standard.”

“Whilst there are important differences, and the range of employee benefits covered by IAS19 is wider than for FRS17, the two standards are substantially similar in many respects, including the basic 'bond based' approach to measuring pension obligations. “

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