IASB orders more research into controversial accounting rule changes

The International Accounting Standards Board (IASB) has instructed its staff to carry out more research into its project regarding defined benefit (DB) surplus accounting rules.

The controversial proposed amendments to asset-ceiling guidance under IFRIC 14 rules could lead to sponsors recognising huge additional liabilities, according to critics of the IASB’s proposals.

IASB members agreed that staff should “perform further work to assess whether [they can] establish a more principles-based approach… for an entity to assess and measure its right to a refund of a surplus”.

IASB vice-chair Sue Lloyd said: “It seems that we might be at risk of making a change that might only be relevant to one jurisdiction, where non-substantive changes might mean that that change has very little effect anyway.”

The focus of the staff’s research will be paragraph 11 of IFRIC 14, which specifies the circumstances in which an entity has a right to a refund. Staff said they also wanted to assess whether any work to clarify the words in paragraph 11 could be kept narrow in focus.

IASB director Petrina Buchanan said the board didn’t propose to change a “very strict differentiation” between a full and gradual settlement of a plan. She said staff expected to bring back papers to the board “probably before the end of the year”.

Consultants who spoke to IPE ahead of the meeting said it was possible that the IASB could decide there was little benefit in continuing with the project.

It was also possible that DB schemes in the UK would be able to dodge the amendments by renegotiating their scheme rules, they said.

The IASB and its interpretations committee launched the IFRIC 14 project in late 2014 to clarify the circumstances in which a DB scheme could recognise a surplus. Critics of the proposals have argued that whether or not an entity recognises a liability can often turn on a narrow legal interpretation of a scheme’s rules.

Since then, however, proposed changes to the wording of the board’s 2015 exposure draft have expanded the scope of the changes.

Consultants have warned that the changes now capture not only an insurance buyout of a plan but also a buy-in.

The board also agreed to proceed separately with proposed amendments to IAS 19. These changes deal with amendments, settlements and curtailments to DB plans.