Ias 19 amends

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IASB Amends IAS 19
The Next Phase in the Evolution of
Accounting for Retirement Benefits
July 2011

Executive Overview
In a further step in the evolution of the accounting
for retirement benefits, the International Accounting
Standards Board (IASB) has issued its long-awaited
amendment to IAS 19, Employee Benefits (IAS 19, rev.
2011). As amended, IAS 19 will require immediaterecognition of all changes in the funded position of
employers’ retirement plans. It also establishes a new
measure of net interest income or cost. The effect of
the changes will vary depending on a company’s current
accounting policy under IAS 19. The key changes for
plan sponsors to consider are:
• Immediate recognition of all noncash changes in
funded position — gains and losses arising fromexperience differing from what was assumed,
changes in assumptions, investment gains and
losses on plan assets, and the effect of plan
• Replacement of interest cost and the expected
return on plan assets with net interest income/cost
on the asset or liability recognised on the balance
sheet; this net interest income or cost is measured
based on the plan’s discount rate
•Disaggregation of the components of retirement
cost into service cost, net interest on the defined
benefit asset or liability, and remeasurement effects
(gains/losses, including asset returns differing from
the discount rate and changes in the asset ceiling);
the remeasurement component is reported in other
comprehensive income (OCI), whereas the service
cost and net interest income/cost are reportedin
profit and loss (P&L)


• Clarification of guidance on measurement issues,
such as the treatment of plan administration costs,
taxes paid by the plan and the implications of risksharing features of the plan
• Expanded disclosures to provide more insight about
the company’s risks associated with the retirement
plans, including the timing, amount and uncertainty
offuture cash flows, and the implications of the
regulatory environment in which the plans operate
The changes to IAS 19 will affect entities differently,
depending on the nature of their plans and current
accounting policies, but will often result in some or all
of the following:
• Lower net income
• Less volatility in net income
• Higher balance sheet liability or lower balance sheet
assetfor retirement benefits
• Greater volatility in the balance sheet asset or
• More onerous disclosure requirements
IAS 19, rev. 2011 is effective for fiscal years beginning
on or after 1 January 2013; retrospective application
(restatement of prior periods’ financial statements and
financial information presented for comparative
purposes) is required. Early adoption is permitted.IASB Amends IAS 19: The Next Phase in the Evolution of Accounting for Retirement Benefits 2

Users of financial statements have expressed concerns
about employers’ transparency in accounting for and
reporting on their benefit promises under current
accounting rules, the risks associated with their benefit
plans and the effect of the benefit plans on the entities’
financialposition and income. In addition, the increased
prevalence of less traditional retirement plan designs
has led to questions about the measurement of
retirement obligations.
In June 2011, the IASB issued an amendment to IAS
19 to address short-term targeted changes to the
accounting for employee benefits. Those changes,
which are responsive to the concerns raised by analysts
and investors,are focused on recognition and presentation of changes in the defined benefit obligation (DBO)
and plan assets, expanded disclosures and clarification
of miscellaneous measurement and definitional issues.
The amendment sets the stage for a more comprehensive reexamination of the accounting for, and financial
reporting of, post-employment benefit promises.
However, whether and, if so, when...