IFRIC 14 IAS 19—The Limit on a Defined Benefit Asset Minimum Funding Requirements and their Interaction
Scope of IFRIC 14
IFRIC 14 addresses three issues:
- how entities should determine the limit placed by IAS 19 Employee Benefits on the amount of a surplus in a pension plan they can recognise as an asset
- how a minimum funding requirement affects that limit and
- when a minimum funding requirement creates an onerous obligation that should be recognised as a liability in addition to that otherwise recognised under IAS 19.
Reason for IFRIC 14
IAS 19 lacks detailed guidance in this area and practices vary.
Impact of IFRIC 14
- IFRIC 14 will standardise practice and ensure that entities recognise an asset in relation to a surplus on a consistent basis.
- In jurisdictions where there is both a strong minimum funding requirement and restrictions over the amounts that entities can recover from the plan, either as refunds or reductions in contribution, entities may have to recognise an additional liability.
Effective date
IFRIC 14 is mandatory for annual periods beginning on or after 1 January 2008. Earlier application is permitted.
Discussed by the IFRIC:
Discussed by the IASB:
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