High-level Comparison of Section 4600 (Part IV) to Section 4100 (Part V) of the Handbook
This comparison has been prepared by staff of the Accounting Standards Board (AcSB) and has not been approved by the AcSB. It should not be used in preparing financial statements. To understand fully the implications of applying and presenting financial statements in accordance with the accounting standards for pension plans, users of the comparison must refer to the standards themselves. It reflects the standards issued in April 2010 and updated in August 2010.
Section 4600, Pension Plans, in Part IV of the Handbook is based on existing Section 4100, Pension Plans, in Part V, with the following substantive modifications:
- The standards apply to all pension plans as well as to benefit plans with characteristics similar to pension plans that provide benefits other than pensions (for example, retiree health care and life insurance benefits, and long-term disability plans), with necessary adaptations.
Basis of Accounting
- A pension plan follows the requirements set out in the standards for the measurement, presentation, and disclosure of its investment portfolio and pension obligations.
- In selecting or changing accounting policies that do not relate to its investment portfolio or pension obligations, a pension plan complies (on a consistent basis) with either IFRSs in Part I of the Handbook, or accounting standards for private enterprises in Part II of the Handbook, to the extent that those standards do not conflict with the requirements of the Section.
- A pension plan also follows the general financial statement presentation requirements with respect to fair presentation, comparative information and materiality in Part I or Part II of the Handbook (consistent with the choice made for accounting policies that do not relate to the investment portfolio or pension obligations).
Statement of financial position (renamed from “statement of net assets available for benefits”)
- The statement of financial position includes the net assets available for benefits (a total including investment assets, investment liabilities, and any other assets and liabilities of the pension plan), the pension obligations, and the resulting surplus or deficit.
- Investment assets and investment liabilities are distinguished by type and presented either on the face of the statement or in the notes to the financial statements.
- Investments in entities over which the pension plan has control or can exercise significant influence are presented on the same basis as all other investments (for example, consolidation or equity accounting are not to be used).
- All financial assets and financial liabilities are recognized and derecognized in accordance with the applicable requirements in either IAS 39 Financial Instruments: Recognition and Measurement in Part I of the Handbook, or Section 3856, Financial Instruments, in Part II of the Handbook, consistent with the basis of accounting chosen (see above).
- Fair value is determined in accordance with the guidance in IAS 39 Financial Instruments: Recognition and Measurement in Part I of the Handbook. (The AcSB intends to have Section 4600 refer to the proposed IFRS on Fair Value Measurement after it is issued.)
- Investment assets cannot be measured on an actuarial asset value basis. Also, the difference between fair value and actuarial asset value does not represent an asset or a liability that can be included in a pension plan’s financial statements.
- Consistent with IAS 39, transaction costs are not included in fair value, but are included in the statement of changes in net assets available for benefits as part of expenses incurred in the period.
- An interest in a master trust is measured at fair value, consistent with all other investment assets. Proportionate consolidation and the equity method of accounting are not permitted.
- Measurement of a pension obligation at the accrued benefit obligation amount determined by the plan’s sponsor is permitted.
Statement of changes in net assets available for benefits
- Details of investment income by type are presented either on the face of the statement or in the notes to the financial statements.
- Details of contributions, administrative expenses and benefit payments are presented.
- Changes in the fair value of investment assets and investment liabilities on the statement of financial position include both realized and unrealized gains and losses.
Statement of changes in pension obligations
- Details of changes in pension obligations are presented.
- For those investments that are financial instruments, the disclosures in IFRS 7 Financial Instruments: Disclosures in Part I of the Handbook are required. For all other investments, a description of how fair values have been determined is provided.
- Defined contribution plans in which the plan participants direct their investments may omit disclosure of the quantitative sensitivity analysis disclosures for market risk required in IFRS 7.
- Disclosures are made that enable pension plan financial statement users to evaluate a plan’s objectives, policies, and processes for managing capital in accordance with the requirements in IAS 1 Presentation of Financial Statements in Part I of the Handbook.
- A pension plan that prepares its financial statements in accordance with Canadian accounting standards for pension plans is required to state this basis of presentation prominently in the notes to its financial statements.
- The effective date of the next required actuarial valuation, significant accounting policies, additional related party information, the name of the actuarial firm that performed the valuation, and significant assumptions used in determining the pension obligation including the rate of compensation increase and the discount rate are required disclosures.
- Other existing “desirable” disclosures are now required disclosures.