EBA欧洲银行-2010-09-06-28CEBS-comments-on-ED-2010-3-Defined-Benefit-Plans29_7页_183kb

Summary of CEBS Comments on IASB's Exposure Draft ED/2010/3: Defined Benefit Plans – Proposed Amendments to IAS 19

Core Content

The Committee of European Banking Supervisors (CEBS) has provided feedback on the IASB's Exposure Draft (ED) ED/2010/3, which proposes amendments to IAS 19 regarding the accounting for defined benefit plans. CEBS supports the IASB's objective of improving the transparency, understandability, and comparability of financial information related to long-term employee benefits, particularly in the context of banking and financial institutions. However, they also raise several concerns and suggestions for further clarification and improvement.

Main Views

1. Recognition of Gains and Losses

• CEBS agrees with the proposal to eliminate deferred recognition and adopt an immediate recognition model for gains and losses arising from defined benefit plans.
• This approach is seen as more transparent and reduces the drawbacks of the current method, such as the misrepresentation of assets and liabilities based on plan surplus or deficit.
• CEBS expresses concern about the potential impact of this model on financial institutions, especially in the current economic environment, and suggests exploring transitional provisions.

2. Disaggregation of Defined Benefit Costs

• CEBS supports the proposed disaggregation of defined benefit costs based on different predictive implications.
• They agree with the exclusion of changes in demographic assumptions from the service cost component, as such changes are long-term and may lead to unintended consequences.
• CEBS emphasizes the importance of using reliable interest rates for the net defined benefit liability (asset) to avoid manipulation of accounting results.
• They also suggest that the disaggregation of net interest into interest income and interest cost should be required in note disclosures, not just as a presentation option.

3. Presentation of Net Interest

• CEBS is concerned that allowing the presentation of net interest as an option (per paragraph 119C) is inconsistent with the ED's objective of reducing complexity.
• They argue that the presentation of net interest in profit or loss (as per paragraph 119A) is more appropriate and should be maintained.

4. Disclosures

• CEBS supports the IASB's move to strengthen disclosure requirements, especially around actuarial assumptions and sensitivity analysis.
• They recommend that disclosures on the "Characteristics of defined benefit plans" should include movements in employees (e.g., retirements, new hires).
• They suggest that the "Explanation of amounts in the financial statements" should allow for a split between current and former employees.
• CEBS also recommends that the "significant actuarial assumptions" should include those from paragraph 73 and that entities should provide full reasoning for excluding any assumptions from this list.
• They highlight the need for more objective and less subjective references in sensitivity analysis to avoid interpretation differences among entities.

5. Risk-Sharing and Conditional Indexation Features

• CEBS welcomes the proposed amendments that require the use of best estimates for defined benefit obligations.
• They are concerned about the practical interpretation of these proposals and suggest that the IASB should provide additional guidance.
• CEBS prefers a set of principles over detailed rules to allow for flexibility in complex pension fund contracts.

6. Multi-Employer Plans

• CEBS agrees that a multi-employer defined benefit plan should be treated as a defined contribution plan if there is no consistent and reliable basis for allocation.
• However, they note that if plan assets are ring-fenced and costs are calculated based on the entity's own employees, a defined benefit approach may be appropriate.

7. Transition and Implementation

• CEBS encourages the IASB to consider an alternative transition approach, similar to the one used in IFRS 1, to minimize the burden of constant changes.
• They question the feasibility of a full retrospective application and suggest exploring other methods for transitioning to the new rules.

Key Information

• CEBS is a high-level committee representing banking supervisory authorities and central banks in the EU.
• The ED aims to improve the accounting for long-term employee benefits, with a focus on defined benefit pension schemes.
• CEBS is particularly interested in the impact of these changes on financial position and prudential regulatory capital.
• They highlight the need for consistency and coherence in future amendments to IAS 19.
• CEBS encourages the IASB to consider a more comprehensive review of the standard, especially in light of the complexity of pension schemes.