The International Accounting Standards Board (IASB) is to consider possible changes to its pensions accounting rulebook following growing public interest in hybrid-risk plans.
A pensions accounting research project aimed at considering the issue has been added to the watchdog’s official workplan, it emerged as an updated workplan was released on 19 July during its monthly meeting round.
The project, not expected to start until early next year, will investigate a possible change to the board’s pensions accounting rulebook, International Accounting Standard 19, Employee Benefits (IAS 19).
A research project is typically the board’s starting point ahead of any decision to mount a formal standard-setting project.
IASB research director Peter Clark said: “The objective of the research projects is not to do the standard setting – it is to gather the evidence.
“We expect to concentrate just on the active projects this year and not to dilute focus by starting any of the pipeline projects, certainly before the end of this year.”
The board has recently mounted a low-key review of IAS 19.
Although the board opted against launching a pensions project on the back of that review, feedback to its recent public agenda consultation suggested support for it to add a narrow-scope feasibility study to its research pipeline.
The approach that the board will now consider adds up to a possible solution to the accounting challenges presented by some hybrid-risk plans, which seek to balance the risks between defined benefit and defined contribution schemes.
The approach, known as the ‘capped’ ultimate-costs-adjustment model, would apply to pension promises that vary according to the level of returns on specified assets.
It works by capping the cash flows included in the measurement of the pension liability.
One potential advantage of the approach is that it does not require the board to revisit plan classification under IAS 19.
The new research project does not commit the board to make any amendments to IAS 19.