ARGENTINA - The Argentine Federation of Accountants has released a new rule establishing guidlines for recognising liabilities and expenses related to pension plans.
Called “Technical Rule 23”, the ruling will affect all pension plans and is mandatory for all financial statements dated after 1 January, 2006.
According to Watson Wyatt the approach established in the Argentine Standard is not dissimilar to the international Accounting Standard (IAS) 19 and therefore subsidiaries of either European or American companies will probably have a reduced impact in their profits and loss (P&L) statements.
However the consultant does expect a “moderate” impact on the P&L of defined benefit pension plans, seniority rewards or other long-term benefits.
The main guidelines of Technical Rule 23 stipulate that liabilities and expenses related to defined benefit plans and other long-term benefits should be valued using “Projected Unit Credit.” At this stage, actuarial advice is mandatory.
The annual contribution to defined contribution plans is recognised as a liability and an expense. Defined benefit plans allow for deferred recognition of some items, such as Past Service Cost, Actuarial
In addition the liability increase arising from the use of the standard could be amortised in several periods, decreasing 2006 P&L impact. For all plans, the provisions, assumptions and, dependent on the scheme type, the reconciliation of some figures from previous year valuation have to be enclosed.
By Daniel Flatt
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