Actuarial gains and losses to be recognised
The International Accounting Standards Board has proposed changing aspects of the IAS19 accounting standard on employee benefits – bringing it closer to mark-to-market standards such as the UK’s FRS17.
The IASB has issued a so-called exposure draft called ‘Proposed Amendments to IAS 19 Employee Benefits: Actuarial Gains and Losses, Group Plans and Disclosures’.
According to a consultation paper from the UK’s Accounting Standards Board, the IASB is proposing introducing an option to allow actuarial gains and losses to be recognised in full as they arise, outside profit or loss, in a statement of recognised income and expense.
“This would allow entities to recognise such gains and losses in the same manner as is required by the UK standard FRS17,” the ASB said.
IAS19 currently permits actuarial gains and losses in a defined benefit scheme not to be recognised in the period in which they occur, but instead spread forward over the service lives of the employees.
“The ASB fully supports the IASB’s proposal to permit the immediate recognition of actuarial gains and losses in a similar manner to that required by FRS17,” said Mary Keegan, chairman of the ASB.
“This will enable companies using international accounting standards in their financial statements from 2005 to follow the lead of FRS17 in bringing much needed transparency to a subject with potentially enormous financial implications.”
qIASB has also issued draft guidance on accounting for multi-employer pension schemes.
The new guidance, ‘Draft Interpretation D6’, has been issued by
the IASB’s International Finan-
cial Reporting Interpretations
It deals with the way that entities that participate in defined benefit plans that have more than one participating employer, and who share actuarial risks, should comply with the employee benefits standard IAS19.It said: “D6 requires participants to make every practicable effort to apply defined benefit accounting.”
“This is to be done by measuring the plan’s assets and liabilities on the basis of assumptions appropriate for the plan as a whole and allocating the plan, if possible, so that a participant recognises an asset or liability that reflects the extent to which the surplus or deficit in the plan will affect its future contributions.”
It added that if participants cannot analyse the change in the surplus or deficit into the cost components required by IAS19, then they should recognise its share of the surplus or deficit in the balance sheet and recognise the total change in value of its share immediately in profit or loss.
The proposals are in response to a concern that IAS19 is being interpreted to allow all participating entities in multi-employer plans an automatic exemption from defined benefit accounting.