IPE has published an article dealing with the fact that the IASB has confirmed it will press ahead with a series of potentially controversial amendments to its IAS 19 asset-ceiling guidance known as IFRIC 14.
Lane Clark & Peacock LLP’s Tim Marklew said: “I see the IFRIC 14 amendments as a huge issue for UK companies.”
He added that he saw the changes as less worrying than parallel amendments to International Accounting Standard 19, Employee Benefits (IAS 19), which deals with the need to update plan assumptions.
Last month, the LCP warned that the shift in focus of the way the committee drafted its proposals could affect more DB plan sponsors than first believed.
The IFRIC 14 changes in their current form could force schemes to recognise an additional liability where a scheme’s trustees have the power to mount a buyout.
The news comes as scheme sponsors battle to contain ballooning pension deficits brought in a low-interest-rate environment.
The International Financial Reporting Standards Interpretations Committee (IFRS IC) proposed the IFRIC 14 amendment in 2015.
It is intended to clarify how sponsors should take account of the right a third party might have to wind up a plan or adjust member benefits without the sponsor’s consent.
In general terms, the amendment means a sponsor does not have an unconditional right to a surplus if other parties can use the surplus to enhance members’ benefits.
Although a sponsor can recognise a surplus even if trustees can wind up a plan without its consent, the sponsor cannot assume a gradual settlement of plan liabilities.
It is this aspect of the proposed changes that has provoked the most concern among IASB watchers.
© IPE International Publishers Ltd.
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