IAS 26 – Accounting and Reporting by Retirement Benefit Plans Wiecek and Young IFRS Primer Chapter 36

2 Part 2: IAS 26 – Objective and Scope Purpose – sets out the accounting and reporting standards for retirement benefit plans as a basis for the plans’ reporting to all participants as a group – applies to both defined benefit and defined contribution plans Retirement benefit plan – an arrangement in which an entity provides annual income or lump sum benefits to employees at or after the termination of their service Most retirement benefit plans are based on formal agreements – require separate funds to be established to receive contributions and pay the benefits – such funds are usually administered by an independent party, often called a trustee

3 Part 2: IAS 26 – Defined Contribution Plans Benefits paid to plan participants are a function of the following: – participant and employer contributions into the plan – the return earned on the plan assets – the operating efficiency of the plan’s management Financial reporting objective (inclusions to the financial statements): (a) a description of the significant activities for the period (b) a report on the period’s transactions and investment performance, and the plan’s financial position at the end of the period (c) a description of the investment policies Required presentations: – a statement of net assets available for benefits – a description of the funding policy

4 Part 2: IAS 26 – Defined Benefit Plans Defined benefit plan – one in which the benefits paid are determined by a formula, usually based on employees’ earnings and/or length of service The ultimate payment of the promised benefits is dependent on – the financial position of the plan – the ability of contributors to make future contributions – the investment performance and operating efficiency of the plan Additional reporting objective: – actuarial information on the plan’s obligations and the extent to which these have been provided Required information in the plan’s actual financial statements: net assets available for benefits actuarial present value of the obligation for vested retirement benefits and for non- vested benefits explanation of the resulting excess/deficiency of assets available

5 Part 2: IAS 26 – All Plans: Valuation of Plan Assets Retirement benefit plan investments – carried at fair value in the case of marketable securities this is the market value When it is not possible to determine an investment’s fair value, the reason must be provided Other assets used in the operations of the plan are accounted for under applicable IFRSs

Part 2: IAS 26 – Disclosure Required disclosures for both defined contribution and defined benefit plans: 1. a statement of changes in net assets available for benefits 2. a summary of significant accounting policies 3. a description of the plan and the effect of any changes to it during the period The statement of changes in net assets available for benefits is similar to an income statement and reports contributions into the plan, both from the employer and the employee investment income such as interest and dividends, and other income benefits paid or payable, classified by type Additional disclosures – information about its benefit obligation – the funding policy and the significant actuarial assumptions made 6