The International Accounting Standards Board (IASB) has issued Plan Amendment, Curtailment or Settlement (Amendments to IAS 19). These amendments are narrow in scope and specify how companies must determine pension expenses upon changes to a defined benefit pension plan.
Companies account for defined benefit plans under International Accounting Standard (IAS) 19, Employee Benefits.When there is a change to a plan, whether an amendment, curtailment, or settlement, IAS 19 requires a company to remeasure the net defined benefit liability or asset.
Under the amendments, a company must use the updated assumptions from this remeasurement to determine current service cost and net interest for the remainder of the reporting period after the plan change. IAS 19, prior to these amendments, did not specify how to make this determination.
The IASB expects that the requirement to use updated assumptions will provide useful information to financial statements users.
The amendments apply to plan amendments, curtailments, or settlements occurring on or after the beginning of the first annual reporting period that begins on or after 1 January 2019. Earlier application is permitted but must be disclosed.
A link to the amendments is available below.