Comments from ACCA to the International Accounting Standards Board (IASB), 25 July 2013.
General comments
ACCA supports the proposed amendments to IAS 19, as explained below in our responses to the specific questions raised by the IASB. We also believe that the proposal for retrospective application of the changes will not cause undue difficulty for preparers in practice.
We now give our comments on the specific questions raised in the ED, as follows.
Q1: Reduction in service cost
The IASB proposes to amend IAS 19 to specify that contributions from employees or third parties set out in the formal terms of a defined benefit plan may be recognised as a reduction in the service cost in the same period in which they are payable if, and only if, they are linked solely to the employee’s service rendered in that period. An example would be contributions that are a fixed percentage of an employee’s salary, so the percentage of the employee’s salary does not depend on the employee’s number of years of service to the employer. Do you agree? Why or why not?
ACCA response
ACCA agrees with this proposed change, both for the practical reason of avoiding complexity, and due to the substance of these payments made by employees (or third parties).
The payments are a stated fixed percentage of pensionable remuneration, and are due as an employee gives service. They do not reflect other periods by, for example, varying according to an employee’s length of service. We agree that where the latter case applies, the proposed simplification would be inappropriate.
Q2: Attribution of negative benefit
The IASB also proposes to address an inconsistency in the requirements that relate to how contributions from employees or third parties should be attributed when they are not recognised as a reduction in the service cost in the same period in which they are payable. The IASB proposes to specify that the negative benefit from such contributions is attributed to periods of service in the same way that the gross benefit is attributed in accordance with paragraph 70. Do you agree? Why or why not?
ACCA response
ACCA supports the proposed clarification that the gross and negative benefits should be attributed in the same way to service periods, and that the reference to attributing a net amount should be removed. We agree that it is practical, and also more accurate, to assess the gross and negative benefits separately.
Q3: Other comments
Do you have any other comments on the proposals?
ACCA response
The changes will be applied retrospectively, from a date to be determined. We do not believe that retrospective application will add undue complexity to the existing process of determining the defined benefit obligation and service cost.