IASB plans to change IAS19 standard

GLOBAL – The International Accounting Standards Board has proposed changing aspects of the IAS19 accounting standard on employee benefits – bringing it closer to mark-to-market standards such as the UK’s FRS17.

The IASB has issued a so-called exposure draft called ‘Proposed Amendments to IAS 19 Employee Benefits: Actuarial Gains and Losses, Group Plans and Disclosures’.

According to a consultation paper from the UK’s Accounting Standards Board, the IASB is proposing introducing an option to allow actuarial gains and losses to be recognized in full as they arise, outside profit or loss, in a statement of recognised income and expense.

“This would allow entities to recognise such gains and losses in the same manner as is required by the UK standard FRS17,” the ASB said. The controversial FRS17 standard has been called “the final nail in the coffin of defined benefit pension schemes” by the head of phone firm Cable & Wireless.

IAS19 currently permits actuarial gains and losses in a defined benefit scheme not to be recognised in the period in which they occur, but instead spread forward over the service lives of the employees.

Another amendment would entail “an extension of the application of multi-employer plan accounting to entities within a consolidated group that meet certain criteria”.

“The ASB fully supports the IASB’s proposal to permit the immediate recognition of actuarial gains and losses in a similar manner to that required by FRS17,” said Mary Keegan, chairman of the ASB.

“This will enable companies using international accounting standards in their financial statements from 2005 to follow the lead of FRS17 in bringing much needed transparency to a subject with potentially enormous financial implications.”

The ASB said the IASB is considering “a comprehensive review of accounting for post-employment benefits” – though it would take time. Comments are sought on the UK board and the IASB draft by July 31.

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