The International Accounting Standards Board (IASB) has tentatively approved a series of proposed pensions accounting disclosures in a bid to address complaints that existing rules do not meet their needs.

Staff told a board meeting on 24 July that users of financial statements had been reporting that “today’s disclosures often do not meet their primary objectives”.

Accounts preparers had argued that “many of those same disclosures are onerous to prepare”, IASB staff said, and they also questioned whether the disclosures passed the cost-benefit test.

In total, the board tentatively approved a package of six specific disclosures related to the reporting of defined benefit (DB) obligations, as well as a high-level catch-all disclosure.

Full details of the staff’s updated description of those disclosures are set out in the July 2019 edition of IASB Update.

The detailed wording of the requirements remain subject to further staff input and drafting.

However, the IASB rejected three further proposed disclosures about alternative plan valuations, sensitivities, and forecasting future DB obligations.

The IASB’s work on pensions disclosures forms part of its overall Disclosure Initiative project. This could eventually result in a series of changes to the disclosure requirements of International Accounting Standard 19, Employee Benefits (IAS19).

‘Catch-all’ disclosure

The basis for the board’s work on pensions accounting was its work last year on draft guidance for use when developing and drafting disclosure requirements. 

The guidance is currently based around the premise of using specific disclosure objectives to elicit relevant information supported by a catch-all or high-level disclosure.

Staff explained in their 24 July meeting paper that this catch-all disclosure was supposed to “prompt entities to consider as a whole the disclosure relating to a topic and whether the information provided meets overall user information needs for that topic”.

Regarding the draft catch-all disclosure for pensions, staff agreed to redraft their proposed wording in the light of board member comments during the meeting. 

Project manager Kathryn Donkersley told the meeting it was “clear that the language is not satisfying everyone at the moment and that is perhaps something that we should think about in a bit more detail”.

Accordingly, the vote in favour of the disclosure requirement was based on the board wanting “to include a high-level disclosure objective that captures both aggregation and desegregation and for the staff to go away and develop more precise wording around that instruction from the board”.

Also troubling for board members – despite approving the broad thrust of the disclosure – was the requirement for preparers to evaluate and disclose the impact of DB obligations on a company’s future cash flows.

In response to the concerns, staff said they had landed on the words “reasonably known” in order to avoid forcing sponsors to predict the future.

Donkersley said: “That is definitely a drafting challenge that we are working on, and I think all of your comments are reiterating the importance of continuing to do that.”

IASB members also approved separate staff proposals for specific and catch-all disclosures dealing with both defined contribution plans and multi-employer plans.

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