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IASB postpones IAS19 discount rate decision

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  • IASB postpones IAS19 discount rate decision

GLOBAL - The International Accounting Standards Board has deferred any shake-up of the current IAS19 AA-rated corporate bond discount until at least 2011.

Eleven board members voted against any change during an 18 March meeting, however, the standard setter will now seek input on the issue from the actuarial profession ahead of tackling discount rates in Phase II of the pensions project.

IASB chairman David Tweedie said: "This would not be a quick issue if we did this. It would stop the project stone dead. But I think it is worthwhile asking our critics what we should do [in the next phase]."

Contrasting his view, Jim Leisenring, a former FASB and now IASB member, said he was strongly against any changes to IAS19 and argued "I do not understand why we would be doing this at all" as well as stressing he "would not touch these issues with a barge pole."

This latest decision sits uncomfortably for some board members alongside its earlier controversial move to require businesses to show what it calls pension plan "remeasurements" in profit and loss.

IASB member Stephen Cooper charged that the board is "thinking about putting the change in this meaningless number in the income statement."

His comments came after the board tentatively cleared compromise proposals on financial reporting presentation, which will see information that already exists in the statements of recognised income and expenses (SORIE) placed directly in profit and loss.

Under the fudged model, servicing costs and interest costs on a pension plan's obligations will go in the operating section of the profit and loss account, with so-called ‘other components' listed as net of tax in financing.

This compromise emerged after Tweedie slammed a competing IASB staff proposal as "a complete cop out" which he believed would allow businesses "to do anything they want" in financial reports.

The decisions form part of IASB's two-phase project on pensions accounting which, according to its current work plan, the board hopes will deliver a range of short-term improvements to IAS19.

After completion of Phase I in 2011, the IASB board intends to join with the US FASB to embark on a wider shake-up of pensions accounting.

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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