PAS19/R
IAS 19 – EMPLOYEE BENEFITS
The Standard prescribes the accounting and disclosure by employers for employee benefits. It replaces IAS 19 Retirement Benefit Costs which was approved in 1993.
The Standard identifies four categories of employee benefits:
(a)shortterm employee benefits, such as wages, salaries and social security contributions, paid annual leave and paid sick leave, profitsharing and bonuses (if payable within twelve months of the end of the period) and nonmonetary benefits (such as medical care, housing, cars and free or subsidized goods or services) for current employees;
(b)Postemployment benefits such as pensions, other retirement benefits, and postemployment life insurance and postemployment medical care;
(c)other longterm employee benefits, including longservice leave or sabbatical leave, jubilee or other longservice benefits, longterm disability benefits and, if they are payable twelve months or more after the end of the period, profitsharing, bonuses and deferred compensation; and
(d)Termination benefits.
CORRIDOR APPROACH
The corridor rule is a materiality rule that requires disclosure of a pension actuarial gain or loss, if the gain or loss exceeds 10% of the greater of the Pension Benefit Obligation (PBO) or the fair value of plan assets. If this is the case, then the corridor rule allows this actuarial gain or loss to be amortized gradually over time into the income statement. Overall, the corridor rule can be seen as having a smoothing effect with respect to reporting pension gains and losses. The corridor rule was established under FASB Statement 87 in December, 1985. According to this statement, the prior accounting standards for pension reporting were too weak, and resulted in inconsistent reporting methods between companies, and sometimes even different methods from one period to the next.
IAS 19R – REVISED
Change in accounting policy (IAS 19)
The amended IAS 19 "employee benefits" implies that the corridor approach is
The Standard prescribes the accounting and disclosure by employers for employee benefits. It replaces IAS 19 Retirement Benefit Costs which was approved in 1993.
The Standard identifies four categories of employee benefits:
(a)shortterm employee benefits, such as wages, salaries and social security contributions, paid annual leave and paid sick leave, profitsharing and bonuses (if payable within twelve months of the end of the period) and nonmonetary benefits (such as medical care, housing, cars and free or subsidized goods or services) for current employees;
(b)Postemployment benefits such as pensions, other retirement benefits, and postemployment life insurance and postemployment medical care;
(c)other longterm employee benefits, including longservice leave or sabbatical leave, jubilee or other longservice benefits, longterm disability benefits and, if they are payable twelve months or more after the end of the period, profitsharing, bonuses and deferred compensation; and
(d)Termination benefits.
CORRIDOR APPROACH
The corridor rule is a materiality rule that requires disclosure of a pension actuarial gain or loss, if the gain or loss exceeds 10% of the greater of the Pension Benefit Obligation (PBO) or the fair value of plan assets. If this is the case, then the corridor rule allows this actuarial gain or loss to be amortized gradually over time into the income statement. Overall, the corridor rule can be seen as having a smoothing effect with respect to reporting pension gains and losses. The corridor rule was established under FASB Statement 87 in December, 1985. According to this statement, the prior accounting standards for pension reporting were too weak, and resulted in inconsistent reporting methods between companies, and sometimes even different methods from one period to the next.
IAS 19R – REVISED
Change in accounting policy (IAS 19)
The amended IAS 19 "employee benefits" implies that the corridor approach is