17 June 2013
Mr H Hoogervorst
International Accounting Standards Board
30 Cannon Street
London EC 4M 6XH
Dear Mr Hoogervorst
ED/2013/4 Defined Benefit Plans: Employee Contributions
The Group of 100 (G100) is an organization of chief financial officers from Australia’s largest business enterprises with the purpose of advancing Australia’s financial competitiveness. We are pleased to provide on this Exposure Draft. The G100 supports the proposed changes to clarify the requirements and remove inconsistencies in practice.
|Q1||Reduction in service costThe IASB proposes to amend IAS 19 to specify that contributions from employees or third parties set out in the formal terms of a defined benefit plan may be recognised as a reduction in the service cost in the same period in which they are payable if, and only if, they are linked solely to the employee’s service rendered in that period. An example would be contributions that are a fixed percentage of an employee’s salary, so the percentage of the employee’s salary does not depend on the employee’s number of years of service to the employer. Do you agree? Why or why not?
The G100 supports the proposals which seek to clarify the amendments made in 2011 which introduced an unwarranted complexity of attributing benefits to periods of service as a negative benefit.
The G100 believes that the introduction of the practical expediency that such contributions be recognised as a reduction of service cost if the contributions are linked solely to employee service in the period in which they are paid will simplify accounting for those companies adopting this approach.
|Q2||Attribution of negative benefit
The IASB also proposes to address an inconsistency in the requirements that relate to how contributions from employees or third parties should be attributed when they are not recognised as a reduction in the service cost in the same period in which they are payable. The IASB proposes to specify that the negative benefit from such contributions is attributed to periods of service in the same way that the gross benefit is attributed in accordance with para 70. Do you agree? Why or why not?
The G100 supports the proposed amendments to achieve a consistent approach to attribution of the gross benefit and employee contributions to determine the net benefit.
Do you have any other comments on the proposals?
The accounting for plans which are based on a constant percentage of salary and contributions that depend on length of service is clarified. However, it is not clear from the proposals how they will apply to arrangements where contribution rates vary with age, salary or seniority and arrangements that include a minimum service requirement for eligibility to join a plan.
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