IASB's proposal for amendments to IAS 19 Employee Benefits

25 March 2013

The IASB published for public comment an ED of proposed amendments to IAS 19 Employee Benefits related to defined benefit plans: employee contributions. The IASB requests comments to these proposals by 25 July, 2013.

The IASB is responding to concerns that were raised about the complexity of applying certain requirements of IAS 19. Specifically the concerns related to the accounting for contributions from employees and third parties to defined benefit plans. The objective of the proposed amendments is to provide a more straight-forward alternative for this accounting when the contributions payable in a particular period are linked solely to the employee’s service rendered in that period. The proposed guidance would be applicable, for example, to accounting for employee contributions that are calculated according to a fixed percentage of salary.

The IASB proposes to amend IAS 19 Employee Benefits to specify that contributions from employees or third parties set out in the formal terms of a defined benefit plan may be recognised as a reduction in the service cost in the same period in which they are payable if, and only if, they are linked solely to the employee’s service rendered in that period.

The issue originated from a submission to the IFRS Interpretations Committee, which recommended that the IASB amend the Standard. The Interpretations Committee discussed, by considering some examples, whether certain types of employee contributions to a defined benefit plan reduce short-term employee benefits cost instead of reducing post-employment benefits cost. The Interpretations Committee observed that the wording in paragraph 93 of IAS 19 seemed to suggest that all employee contributions in respect of service should be attributed to periods of service as a negative benefit. However, employee contributions that are linked solely to the employee’s service rendered in the same period in which they are payable (for example, if the contributions are a fixed percentage of salary throughout the period of the employment) might also be considered to reduce the cost of short-term employee benefits.

Press release

ED/2013/4

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