EUROPE - The European Financial Reporting Advisory Group (EFRAG) has said that it supports the proposed amendment to the IAS19, which gives companies the option to recognise actuarial gains and losses as they occur in the balance sheet.
EFRAG’s support is crucial as it advises the European Commission on endorsement of the definitive amendments on key issues.
The amendment in the Exposure Draft, which is similar to UK’s FRS 17, gives companies the option to show in full pension deficits and available surpluses in a separate statement known as the Statement of Recognised Income and Expenses (SORIE).
“After considering all arguments put forward by its constituents, EFRAG supports the objective of the Exposure Draft to allow the recognition of actuarial gains and losses in the balance sheet and in the SORIE,” said the EFRAG chairman Stig Enevoldsen (pictured).
He added: “We note that the International Accounting Standards Board (IASB) is proposing an additional option in spite of its expressed intention in the preface not to permit choices in accounting treatment. In this respect, we wish to highlight that the IASB does not necessarily regard the proposed option as an ideal solution, but notes that it would produce transparent information about defined benefit plans.”
However, there are dissenting voices – the OIC, the Italian Standard Setter said that it did not support the core amendment to recognize gains and losses in the balance sheet and the SORIE.
“The new option on the recognition of gains and losses outside the profit and loss account makes it difficult to compare different balance sheets. Actually, actuarial gains and losses are just part of the income and expense. IASB should remember that comparability is the essential target that is at the basis of all new principles and too many options are not consistent with this outcome,” said OIC chairman Angelo Provasoli.
With regard to the proposal on the subsequent recognition of actuarial gains and losses which the IASB says should not be recycled, EFRAG said that the issue of recycling should be studied in a “comprehensive way and therefore the proposed amendments to IAS 19 should by no means pre-empt the outcome of the IASB’s project on comprehensive income in this respect”.
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