Financial Reporting

  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 postemployment 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 OCI, 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 IFRS project page at The IASB said it will schedule a webcast to introduce the amendments. Details on how to take part will be posted on



  The IASB published an exposure draft of proposed amendments to five IFRSs under its annual improvements project. The IASB said in a press release that the proposed amendments reflect issues discussed by the board in the project cycle that began in 2009.


The ED says the project provides a streamlined process for dealing efficiently with a collection of amendments to IFRS.


The ED, Improvements to IFRSs, proposes amendments to the following standards:


IFRS 1, First-time Adoption of International Financial Reporting Standards. The amendments clarify, among other changes, that an entity is required to apply IFRS 1 when the entity’s most recent previous annual financial statements did not contain an explicit and unreserved statement of compliance with IFRSs, even if the entity applied IFRS 1 in a reporting period before the period reported in the most recent previous annual financial statements.


The proposal would also clarify that an entity that capitalized borrowing costs in accordance with its previous GAAP before the date of transition to IFRS may carry forward without adjustment the amount previously capitalized in the opening statement of financial position at the date of transition. In addition, the board proposes to clarify that borrowing costs incurred after the date of transition that relate to qualifying assets under construction at the date of transition should be accounted for in accordance with IAS (International Accounting Standard) 23, Borrowing Costs.


IAS 1, Presentation of Financial Statements. The amendments would clarify the requirements for providing comparative information when an entity provides financial statements beyond the minimum comparative information requirements. The board also proposes to update the objective of financial statements to be the objective of financial reporting, reflecting the Conceptual Framework that was issued in September 2010.


IAS 16, Property, Plant and Equipment. The board proposes to clarify that servicing equipment should be classified as property, plant and equipment when it is used during more than one period and as inventory otherwise.


IAS 32, Financial Instruments: Presentation. This proposal would clarify that income tax relating to distributions to holders of an equity instrument and income tax relating to transaction costs of an equity transaction should be accounted for in accordance with IAS 12, Income Taxes.


IAS 34, Interim Financial Reporting. This proposal would clarify the requirements relating to segment information for total assets for each reportable segment to enhance consistency with the requirements in IFRS 8, Operating Segments. The proposed amendment clarifies that total assets for a particular reportable segment need to be disclosed only when the amounts are regularly provided to the chief operating decision maker and there has been a material change in the total assets for that segment from the amount disclosed in the last annual financial statements.


The ED asks for comments to focus on the following questions:

  • Do you agree with the board’s proposal to amend the IFRS as described in the ED? If not, why and what alternative do you propose?
  • Do you agree with the proposed transitional provisions and effective date for the issue as described in the ED? If not, why and what alternative do you propose?


The proposed effective date for the amendments is for annual periods beginning on or after Jan. 1, 2013, although entities are permitted to adopt them earlier.


The ED is available at Comments are due Oct. 21.


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