The International Accounting Standards Board has withdrawn its project on the availability of a refund of contributions to a defined benefit (DB) scheme sponsor under International Accounting Standard 19, Employee Benefits (IAS19).

IASB chair Andreas Barckow, speaking during the board’s 23 February meeting, said: “Obviously, spending a total of eight years and trying to clarify something is an issue that we need to watch.

“If there is a problem that is prevalent, and we are unable to fix that […] the discussion that we are having right now should have happened much, much earlier.”

IASB vice-chair Sue Lloyd added: “With a somewhat heavy heart, I have to agree.” But, she added, it would be wrong to send out the message that the board had succumbed to pressure to drop the project.

Lloyd explained: “At some point, we are going to have to do something on the pension front, for sure. This is not great.”

The project set out to clarify how a sponsor should assess its right to claim a DB asset where other parties such as a scheme’s trustees could potentially restrict that right. An example of this sort of power is the right to augment member benefits.

Sue Lloyd at IASB

Sue Lloyd, ISAB

The IFRS Interpretations Committee’s predecessor, IFRIC, published IFRIC 14 in 2007 to address the interaction between a minimum funding requirement and the restriction in paragraph 58 on the measurement of the DB asset or liability. 

Where a plan is in surplus, the sponsor recognises the lower of any surplus and the IAS 19 asset ceiling – in other words, the economic benefits available to the sponsoring entity from the surplus.

However, in 2014, a constituent asked whether preparers should take account of events that might disrupt the plan unfolding in line with the IAS19 assumptions when they apply the guidance.

The committee issued an exposure draft detailing its proposals in June 2015. Constituents were broadly united in their criticism of the proposals. In July 2016, the IFRS IC said it planned to review its options for the project.

Subsequently, in 2018, the IASB decided to pause work on the effort until it had a clearer sense of how it wanted to progress its work on hybrid pension promises. Meanwhile, pensions accounting emerged as a low priority among constituents during the recent consultation on the board’s workplan.

IASB member Tom Scott said it would be unreasonable to pursue the project, since the board had already decided not to proceed with its project on pension benefits that depend on an asset return.

That project, he said, had a much wider relevance to more constituents than the board’s work on IFRIC 14.

A total of 11 IASB members out of 12 backed the decision to cease work on the project.

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