EFRAG supports the proposed amendment to IAS 19 and agrees that the amendment is urgently needed. EFRAG notes a concern in its letter about the applicability of the proposed guidance and suggests that alternative guidance is provided in a final standard.
EFRAG’s comments are as follows:
• Since this ED is not intended to be a comprehensive reconsideration of the accounting employee benefits or a reconsideration of determining the discount rate for employee benefit obligations, EFRAG supports the proposal in the ED to eliminate the requirement to use the government bond rate when there is no deep market in high-quality corporate bonds.
• EFRAG agrees that this amendment is urgently needed.
• EFRAG has concerns about the applicability of the IAS 39 Financial Instruments: Recognition and Measurement guidance. It proposes that IAS 19 should refer entities to when they are estimating the yield on high quality corporate bonds. In EFRAG’s view, entities need guidance that helps them to estimate market yields rather than individual bond yields and, in particular, should address issues which entities may need to resolve if there is not a deep market for high quality corporate bonds in their jurisdiction. However, if developing this guidance would delay the finalisation of the amendment, EFRAG suggests that the standard is finalised without the guidance and a post-implementation review is carried out to determine whether additional guidance is needed.
• EFRAG agrees that the amendment should be treated as a change in accounting policy and should be applied retrospectively.
• IASB should require disclosure of the assumptions made in estimating the discount rate used.
© EFRAG - European Financial Reporting Advisory Group
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