EUROPE - The International Accounting Standards Board (IASB) has decided to make changes to its proposal on group plans issued earlier this year.
The Board now says that subsidiaries in a group can either have an agreement to divide up total IAS19 costs for the plan and to show such costs in their accounts or in the absence of such an agreement, the plan sponsor books the difference between the total IAS19 costs for the plan and what other subsidiaries are contributing.
Eric Steedman, a partner at Watson Wyatt, said: They seem to be leaving some scope for companies to decide whether there's going to be an agreed distribution of costs between the subsidiaries or whether the responsibility lies with the principal employer which books the difference between the total cost and the contributions paid by other companies.
Steedman said that the IASB's proposal in the April 2004 exposure draft offered some subsidiaries in group plans a get-out – for example if there were no external shareholders, and the entire plan was being reported inthe parent's accounts, then that company could treat its plan like a multi employer plan and, therefore, potentially like a defined contributionplan.
It was all very complicated and there were some paradoxes. At the time the IASB came out with this proposal, the IFRIC proposed tightening the screws on multi employer plans. I think they have now gone for something much simpler. But what it does mean is that effectively there is going to be no get-out. So, if subsidiaries are using IAS19, then the sum of the parts will have to equal the whole.”
In its update, the IASB said that it had decided that IAS19 should be amended to require group defined benefit plans that share risks between individual group entities to be accounted for in the separate or individualfinancial statements of the group entities as follows: (a) by measuring the plan in accordance with IAS19 on the basis of assumptions applicable to the plan as a whole (it is assumed that this information will generally be available to the group as a whole) and either (b) allocating amounts for the plan to individual group entities in accordance with the contractual agreement or stated policy for charging out the net defined benefit cost, if there is such an agreement or policy, or (c) if there is no such agreement or policy, to the individual group entity that is legally the sponsoring employer for the plan.
The other group entities would recognise a defined benefit cost equal to the contribution charged by the group.
The registration deadline for the Workplace Savings & Benefits Awards 2019 is today.
This week's top stories were the DWP giving the green light to CDC and TPR granting extensions for 11 master trust authorisation applications.
Susan Martin says building strong foundations for business are the only way forward as the pensions industry is radically shaken up
The Pensions Regulator (TPR) has granted Now Pensions a six-week extension for its master trust authorisation application after the 31 March deadline, PP can reveal.