IAS 26 – Accounting and Reporting by Retirement Benefit Plans

1. 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

6. 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