The International Accounting Standards Board (IASB) has received mixed feedback to its proposals for a new approach to pensions disclosures under International Accounting Standard 19, Employee Benefits.
The board heard during a meeting last month that although sponsor entities broadly supported the approach in the March 2021 exposure draft, there was substantial disquiet over precise detail.
Staff said: “Overall, we received mixed feedback on our IAS 19 proposal. Some participants who supported the proposal said that the disclosure objective helped them [to prepare] the IAS 19 note.”
According to the staff meeting paper, these respondents said the proposals resulted in “more useful information about their employee benefits, enabling them to ‘better tell our pension story in a more coherent manner’”.
Others said the disclosure proposals had prompted a complete “rethink” of their pensions footnote by reassessing what information was or was not relevant.
However, staff also noted that a number of fieldwork participants had criticised the proposals and cited concerns about “the level of engagement and comparability.”
The board’s March 2021 proposals trialled a new approach to disclosure by focusing on objectives aimed at teasing out the most relevant information, alongside a catch-all or high-level disclosure.
The board hoped this new approach would encourage preparers to take a broader view of disclosures, which have tended to emerge on a piecemeal basis across the board’s many standards.
As a test bed, the board decided to make a series of proposed targeted amendments to both IAS 19 and International Financial Reporting Standard 13, Fair Value Measurement.
Although attention last month was on feedback from preparers during fieldwork, formal comment letters on the proposals also highlight concerns among pension scheme sponsors and their advisors.
The disclosure problem in IFRS has been variously described as insufficient relevant information, too much irrelevant information, and poor communication of the information that is already in the accounts.
Consultancy Mercer said in their comment letter that although the firm supported the IASB’s decision to trial a more objectives-based approach to disclosure, it was nonetheless “concerned that the lack of mandatory comprehensive minimum disclosures” would reduce comparability and usefulness for users.
The firm also expressed concerns over increased costs for sponsors, both generally and specifically in relation to audit.
Pensions scheme sponsor Siemens AG blamed the complaints about disclosures on the need to make materiality assessments and the exercise of judgement that that process required. The solution to this problem did not involve developing new disclosure objectives, it added.
Specifically on the question of pensions disclosures, Siemens went on to defend the existing approach in IAS 19.
“From our point of view, the current IAS 19 disclosure requirements already result in the provision of effective disclosures, i.e., useful information that meets the overall user information needs for defined benefit plans,” the firm argued.
In addition, Accountancy Europe warned the board that any update to IAS 19’s disclosure requirements could be rendered redundant by any changes to the standard to take account of today’s pensions landscape and modern plan designs.
Staff plan to present a formal analysis of the comment letter response to the exposure draft at a future meeting.