International Financial Reporting Standards (IFRS) by IFRSclass.com

IFRSclass.com^TM

U.S. GAAP Codification

IFRS International Standards

Accounting Standards, ASC

International Accounting Standard (IAS)
Employee Benefits

U.S. GAAP Codification, IFRS, IFRS News and Updates, IFRS for SMEs

Principles of Accounting, Intermediate Accounting, Accounting Textbooks

Securities Law Library, U.S. Tax Code by Section, IFRS Dictionary

IFRS Accounting Topics

IFRIC 14

    IAS 19 - The limit on a defined benefit asset,
                      minimum funding requirements and their interaction
      IFRIC 14 issued in July 2007

      IFRIC 14 amended in November 2009
      "Prepayments of a minimum funding requirement"
      Amendments to IFRIC 14

     IFRIC 14.11
     Refund is available when
     --> the entity has unconditional right to a refund

     IFRIC 14.13
     Economic benefit available as a refund
     = amount of surplus - associated costs

     surplus = fair value of plan assets - present value of defined benefit obligation

     IFRIC 14.16 (Before November 2009 amendments)

     If there is no minimum funding requirement,
     economic benefit available as a reduction in future contributions
     = amount of surplus
     or
     present value of future service cost the entity, if lower

     IFRIC 14.20 (Before November 2009 amendments)

     If there is a minimum funding requirement for contributions,
     economic benefit available as a reduction in future contributions
     = present value of estimated future service cost
        - estimated minimum required funding contributions

     IFRIC 14.16 (After November 2009 amendments)

     If there is no minimum funding requirement,
     economic benefit available as a reduction in future contributions
     = future service cost to the entity

     IFRIC 14.20 (After November 2009 amendments)

     If there is a minimum funding requirement for contributions,
     economic benefit available as a reduction in future contributions
     = (1) + (2) - (3)
     (1) amount of reduction due to prepayment
     (2) estimated future service cost
     (3) estimated minimum funding contributions
          that would be required, if there were no prepayment

IAS 19
     Paragraphs 54 - 60
     Statement of financial position

     IAS 19.54
     Defined benefit liability = (A) + (B) - (C) - (D)
     (A) present value of defined benefit obligation
     (B) actuarial gain not recognised due to corridor approach
     (C) past service cost not recognised
     (D) fair value of certain plan assets
          --> if the obligations are settled directly from those assets

     IAS 19.58
     If the amount measured by IAS 19.54 is negative,
     --> it is an asset

     The amount to be recognised as an asset is
     --> the amount measured by IAS 19.54
     or
     --> the sum of (1) and (2), if lower

     (1) cumulative unrecognised net actuarial losses and past service cost
     (2) present value of economic benefits available
            --> including the refunds or reductions in future contributions


     IAS 19
     Paragraphs 92 - 95
     Actuarial gains and losses

     IAS 19.92
     Corridor approach
     Actuarial gains and losses are recognised as income or expense
     --> only if the unrecognised amount is over the limit

     excess amount
     = net cumulative unrecognised actuarial gains and losses - limit

     limit = the greater of (3) and (4)
     (3) 10% of present value of defined benefit obligation
     (4) 10% of fair value of plan assets


     IAS 19.93
     Amount to be recognised as income or expense
     = excess amount / average of (5)
     (5) the number of years participating employees are expected to work

     faster recognition is allowed
     --> if it is based on a systematic method

International Accounting Standard (IAS) 19

IAS 19 Summary

    Employee Benefits
      IAS 19 first issued in January 1983
      IAS 19, Employee Benefits, issued in February 1998
      Recent amendment: by IAS 1 revised in September 2007

Employee benefits:
      (1) Short-term employee benefits
      (2) Post-employment benefits
      (3) Other long-term employee benefits
      (4) Termination benefits

Post-employment benefits
(1) Retirement benefits: pensions
(2) Other post-employment benefits: life insurance, medical care

Post-employment benefit plans
(1) Defined contribution plans
(2) Defined benefit plans

Defined contribution plans
(1) obligation --> amounts to be contributed to the plan

Defined benefit liability
      --> Liability in the statement of financial position
      --> Defined benefit liability = (1) - (2)
      (1) present value of defined benefit obligation
      (2) fair value of plan assets

Costs to be recognized in profit or loss
      --> net total of the following:
      (1) current service cost
      (2) interest cost
      (3) expected return on plan assets
      (4) actuarial gains and losses
      (5) past service cost

Actuarial gains and losses
      --> a portion of actuarial gains and losses is
      --> recognized as income or expense
      --> if (1) > (2)
      (1) net cumulative unrecognised actuarial gains and losses
           at the end of the previous reporting period
      (2) the greater of (2a) and (2b)
           (2a) 10% of present value of defined benefit obligation
           (2b) 10% of fair value of plan assets

Actuarial gains and losses
      --> amount to be recognized as income or expense = (3) / (4)
      (3) = (1) - (2)
      (4) = expected average remaining working lives of participating employees