IASB Amendments Zoom In on Post-Employment Liabilities

The International Accounting Standards Board (IASB) issued an amended version of IAS 19, Employee Benefits, that the board said completes its project to improve the accounting for pensions and other post-employment benefits and further aligns IFRS and U.S. GAAP by eliminating the so-called “corridor method.”


The IASB said the amendments will provide a much clearer picture of an entity’s obligations resulting from the provision of defined benefit plans and how those obligations will affect its financial position, financial performance and cash flow.


The IASB said the amendments improve financial reporting by:


  • Eliminating an option to defer the recognition of gains and losses, known as the “corridor method,” improving comparability and faithfulness of presentation.
  • Streamlining the presentation of changes in assets and liabilities arising from defined benefit plans, including requiring remeasurements to be presented in other comprehensive income, thereby separating those changes from changes that many perceive to be the result of an entity’s day-to-day operations.
  • Enhancing the disclosure requirements for defined benefit plans, providing better information about the characteristics of defined benefit plans and the risks that entities are exposed to through participation in those plans.


“Many companies have defined benefit pension commitments entered into long ago that can now represent their largest single financial liability,” IASB Chairman Sir David Tweedie said in a press release. “The amendments to IAS 19 … will ensure that investors and other users of financial statements are fully aware of the extent and financial risks associated with those commitments, in particular by requiring the surplus or deficit of a pension fund to be shown in the financial statements.”


The amended version of IAS 19 is effective for financial years beginning on or after Jan. 1, 2013. Earlier application is permitted.


A project summary and feedback statement is available on the project page of the IFRS website. The IASB said it will schedule a webcast  to introduce the amendments. Details on how to take part will be posted on ifrs.org .


C omplete coverage of steps to converge U.S. GAAP and IFRS is available at the JofA’s “ IFRS Resources ” page.


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