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DB disclosure proposals are 'dross' - IASB chairman

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  • DB disclosure proposals are 'dross' - IASB chairman

GLOBAL - IASB chairman David Tweedie has slammed staff proposals for improving defined benefit disclosure proposals as "dross".

"I just find this unacceptable, the sheer heap of disclosures," he told IASB project manager Anne McGeachin during a board meeting discussion last week.

Staff will instead now consult with both board members and users of financial statements, to identify both the objectives of disclosure and on a more limited disclosure package.  "You'll lose the essentials among all the dross," Tweedie said during a public meeting. (An audio recording of the meeting is available online)

"We just cannot ask for all this stuff. I just don't think we can issue this, otherwise the roof will fall in. I think we should be more specific, more focused. To dump all [of] that into a company's accounts, I just can't see this happening. It's just awful. I know we asked for it, it was a mistake."

IASB was slated to publish an exposure draft of defined benefit disclosure proposals to revamp the requirements of its pensions accounting standard IAS19 by the end of March.

Based on the board's tentative decisions to date, the exposure draft will propose removing both the corridor method and the OCI (or SORIE) presentation approach from the standard.

A staff tabular summary of the proposed disclosure requirements, detailed in Agenda Paper 12A, runs to nine sheets of A4 paper.

The proposal sets out a total of 83 separate disclosure items to go on the face of the statement of financial position (balance sheet), governed by three overarching disclosure principles.

An IPE analysis of the paper reveals the source literature for the proposed disclosures as:

existing IAS19 requirements (in some cases amended); ad hoc disclosures recommended by individual board members during project deliberations; International Financial Reporting Standard 7, Financial Instruments: Disclosures; Exposure Draft 10, Consolidated Financial Statements; International Financial Reporting Standard 4, Insurance, and International Financial Reporting Interpretations Committee 14, IAS19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction.

In addition to that package, IASB project manager Anne McGeachin warned the board that sponsors of defined-benefit pension plans will also have to comply with the disclosure requirements of:

the fair value measurement standard, and soon-to-be exposed proposals in the board's financial statement presentation project.

Adding his voice to the chorus of dissent among board members, IASB member Robert Garnett said: "I'm horrified at the length of these disclosures and really the [uselessness] of them."

"You are proposing IFRS7 disclosures, you are proposing fair value measurement disclosures; I think this is just a bomb that's going to explode."

Garnett continued: "If you want to put it out as a separate document and ask people to justify [it], seeing as apparently we can't justify why these disclosures are there, it is going to be an interesting basis for conclusions."

Turning his fire on users of financial statements, Garnett argued "if the users can't justify them, then we just scrap them and give some very high-level disclosures about the plan, including mortality risk".

Similarly, Stephen Cooper, a former equity analyst said: "I would question the automatic read-through from IFRS7 into the pensions disclosures."

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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