Applying Pas 19 Revised (Ifrs)- Ernst&Young

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Applying IFRS
IAS 19 Employee Benefits — revised June 2011

Implementing the 2011 revisions to employee benefits
November 2011

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In this issue:
Introduction Defined benefit plans Significant changes Interim reporting considerations Modified disclosures Clarifications on termination benefits 2 3 3 8 9 12 What you need to know • Revisions to IAS 19 Employee Benefits published by the IASB on 16 June 2011 result in significant changes in accounting for defined benefit pension plans. There are also a number of other changes, including modification to the timing of recognition for termination benefits, the classification of short-term employee benefits and disclosures of defined benefit plans. • The accounting options available under current IAS 19 have been eliminated, resulting in increased comparability between the financial statements of IFRS reporters. • Highlights from the changes for defined benefit plan accounting include: • Actuarial gains and losses are now required to be recognised in other comprehensive income (OCI) and excluded permanently from profit and loss. • Expected returns on plan assets will no longer be recognised in profit or loss. Expected returns are replaced by recording interest income in profit or loss, which is calculated using the discount rate used to measure the pension obligation. • Unvested past service costs can no longer be deferred and recognised over the future vesting period. Instead, all past service costs will be recognised at the earlier of when the amendment/ curtailment occurs or when the entity recognises related restructuring or termination costs. • These revisions are effective for annual periods beginning on or after 1 January 2013, retrospectively, with very few exceptions. Early application is permitted.

New definition of short-term employee benefits 14 Transition Appendix: Main differences or clarifications at a glance 16

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Implementing the 2011 revisions to employee benefits

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Introduction
In June 2011, the International Accounting Standards Board (IASB or the Board) issued revisions to IAS 19 Employee Benefits (the ‘revisions’, ‘IAS 19R’ or ‘revised standard’) that provide significant changes in the recognition, presentation and disclosure of post-employment benefits. IAS 19R also changes the accounting for termination benefits and short-term employment benefits, along with a number of more minor clarifications and re-wording of the standard. The impact of these revisions could range from significant to immaterial. This will depend on the type of employee benefits an entity provides, as well as the accounting options available under current IAS 19 that the entity has selected. Regardless of the magnitude, employee compensation is a fundamental area of accounting and all entities need to be aware of these changes and carefully consider the potential implications. The focus of this publication is to discuss the key accounting impact from EYs perspective as a result of the revised standard.

Background
Timeline
Employeebenefits project added to the agenda July 2006 Discussion paper published May 2008 Exposure draft published April 2010 Amendments to IAS 19 issued June 2011

A key purpose of these revisions was to create greater consistency in accounting for employee benefits by eliminating the recognition and presentation options that exist under current IAS 19. Furthermore, the IASB sought to provide more targeted disclosure requirements that would highlight the relevant risks of defined benefit plans. The IASB has also taken the opportunity to finalise proposals for termination benefits at the same time as those for other employee benefits. These proposals were originally included in the exposure draft, Proposed Amendments to IAS 37 and IAS 19, published in 2005. The revisions to accounting for termination benefits focus on assisting preparers in determining when a benefit is in exchange for future service as...
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