Scribd Logo
Upload

Welcome to Scribd!

  • 35 views

    IAS19 Changes: "New Volatility and Extra Complexity"

    Uploaded by

    Juan Dela Cruz III
    The IASB has issued amendments to IAS 19 that clarify how to account for certain special events in defined benefit pension plans. Specifically, the amendments clarify that: 1) When a special event occurs, entities must determine the current service cost and net interest for the remainder of the period using updated actuarial assumptions determined after the special event. 2) Any past service cost or gain/loss on settlement from a special event should be calculated separately from the effect of the asset ceiling. 3) Changes in the effect of the asset ceiling after excluding amounts from net interest must be recognized in other comprehensive income. This could lead to unexpected profit/loss impacts depending on market conditions at the time

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    IAS19 Changes: "New Volatility and Extra Complexity"

    Uploaded by

    Juan Dela Cruz III
    35 views1 page
    The IASB has issued amendments to IAS 19 that clarify how to account for certain special events in defined benefit pension plans. Specifically, the amendments clarify that: 1) When a special event occurs, entities must determine the current service cost and net interest for the remainder of the period using updated actuarial assumptions determined after the special event. 2) Any past service cost or gain/loss on settlement from a special event should be calculated separately from the effect of the asset ceiling. 3) Changes in the effect of the asset ceiling after excluding amounts from net interest must be recognized in other comprehensive income. This could lead to unexpected profit/loss impacts depending on market conditions at the time

    Original Description:

    IAS 19 changes

    Original Title

    IAS19 Changes

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The IASB has issued amendments to IAS 19 that clarify how to account for certain special events in defined benefit pension plans. Specifically, the amendments clarify that: 1) When a special event occurs, entities must determine the current service cost and net interest for the remainder of the period using updated actuarial assumptions determined after the special event. 2) Any past service cost or gain/loss on settlement from a special event should be calculated separately from the effect of the asset ceiling. 3) Changes in the effect of the asset ceiling after excluding amounts from net interest must be recognized in other comprehensive income. This could lead to unexpected profit/loss impacts depending on market conditions at the time

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    35 views1 page

    IAS19 Changes: "New Volatility and Extra Complexity"

    Uploaded by

    Juan Dela Cruz III
    The IASB has issued amendments to IAS 19 that clarify how to account for certain special events in defined benefit pension plans. Specifically, the amendments clarify that: 1) When a special event occurs, entities must determine the current service cost and net interest for the remainder of the period using updated actuarial assumptions determined after the special event. 2) Any past service cost or gain/loss on settlement from a special event should be calculated separately from the effect of the asset ceiling. 3) Changes in the effect of the asset ceiling after excluding amounts from net interest must be recognized in other comprehensive income. This could lead to unexpected profit/loss impacts depending on market conditions at the time

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 1

    Extract from the Quarter 2 - 2018 edition of Bandwagon Bandwagon The BWCI Group Newsletter

    IAS19 Changes
    “new volatility and extra Summary of changes The IAS 19 amendments clarify that any past
    The International Accounting Standards Board service cost, or a gain or loss on settlement,
    complexity” (“the IASB”) recently issued amendments to should be determined first without considering
    Matt Stanbury IAS 19 Employee Benefits, which will affect the the effect of the asset ceiling. This amount is
    accounting treatment of certain “Special Events” recognised in profit or loss.
    (amendments, settlements and curtailments) in
    defined benefit pension plans. The effect of the asset ceiling after the Special
    Event should then be determined. Any change in
    The amendments relate to the assumptions that effect (excluding amounts included in net
    used to quantify the impact of a Special Event interest) is recognised in Other Comprehensive
    itself, together with the interaction of the impact Income (“OCI”). This means that entities might
    Location PO Box 68, Albert House
    of the Special Event with the asset ceiling have to recognise a past service cost, or loss on
    South Esplanade, St Peter Port
    Guernsey, GY1 3BY
    requirements. settlement, which reduces a surplus that was not
    Tel +44 (0)1481 728432 previously recognised. This could lead to some
    Fax +44 (0)1481 724082 Background unusual situations, such as the position illustrated
    Currently under IAS 19, if a Special Event occurs, in the following example.
    Web www.bwcigroup.com­
    entities should not adjust the assumptions used
    to calculate the current service cost and net Example
    interest during the remainder of the relevant Consider a company with a defined benefit
    reporting period, even if an entity remeasures plan, with assets of 100 and a defined benefit
    the net defined benefit liability/asset as a result obligation (DBO) of 90. Due to the impact of the
    of that Special Event. However the IASB has now asset ceiling the company is not able to recognise
    concluded that this approach is inappropriate. the surplus of 10.

    Determining current service cost and net interest The company then settles the plan. However, the
    At present the current service cost and amount of plan assets it transfers to settle its
    net interest are calculated using actuarial DBO is 100.
    assumptions determined at the start of the
    annual reporting period. However, in future when As a result, the company would need to record
    Jargon Buster a Special Event occurs, an entity will need to: a loss of 10 on settlement in the profit or loss
    account. The assessment of the asset ceiling
    Current service cost is then carried out as a separate step from the
    The increase in the present value of the  D
     etermine the current service cost, for the
    remainder of the period after the Special calculation of the settlement loss. The company
    defined benefit obligation resulting from reverses the effect of the asset ceiling separately
    employee service in the current period Event, using the actuarial assumptions used
    to remeasure the net defined benefit liability through the OCI.

    Curtailment asset after the Special Event


    Effect on Company Accounts
    A significant reduction by the entity in the These changes have the potential to introduce
    number of employees covered by a plan  D
     etermine the net interest for the remainder new volatility and extra complexity to company
    of the period after the Special Event using: accounts. Even small changes to a pension plan
    Defined Benefit Obligation (DBO) could trigger a major knock-on effect on the
    The present value of the accrued scheme (i) the net defined benefit liability/asset profit and loss account. The effect on profit could
    liabilities at the measurement date reflecting the benefits offered under the be positive or negative and will depend on market
    plan and the plan assets after that Special conditions at the time the Special Event occurs,
    Net Interest Cost Event; and making results unpredictable.
    The change during the period in the net
    defined benefit liability/asset that arises (ii) the discount rate used to remeasure that Transition and effective date
    from the passage of time net defined benefit liability/asset The IAS 19 changes must be applied prospectively
    to Special Events occurring on or after the
    Past service cost The IASB expects that using updated beginning of the first annual reporting period
    The change in the present value of the assumptions will provide useful information to commencing on or after 1 January 2019. While
    defined benefit obligation for employee users of financial statements. earlier application is permitted, companies do not
    service in prior periods, resulting from a need to take any action until next year. However,
    Special Event Effect on asset ceiling requirements where a Special Event may be on the horizon
    Where the defined benefit plan has a surplus, sometime over the next year, it would be worth
    Settlement the net defined benefit asset is measured as the considering if it would be preferable, from an
    A transaction that eliminates all further lower of the surplus and the asset ceiling. accounting perspective, if it were to occur before
    legal or constructive obligations for part or after 1 January 2019.
    or all of the benefits provided under Accounting for a Special Event may reduce or
    a defined benefit plan, other than a eliminate any surplus, which may then cause the
    payment of benefits to, or on behalf of, effect of the asset ceiling to change.
    employees that is set out in the terms
    of the plan and included in the actuarial
    assumptions.

    Special Event
    A plan amendment, curtailment or
    settlement

    You might also like