First-time Adoption — Employee Future Benefits
Under the original Section 1500, First-time Adoption, in Part II of the Handbook, an entity that accounted for its defined benefit plans using the deferral and amortization approach could recognize all accumulated actuarial gains and losses and past service costs in opening retained earnings upon transition.
When the entity chose not to utilize this approach, it had to recalculate the recognized and unrecognized amounts relating to actuarial gains and losses and past service costs retrospectively from the inception of the plan. Several constituents expressed concern that this recalculation often involves significant effort and cost and, in some cases, the data may not be available. The AcSB had not intended the application of Section 1500 to force entities already applying Section 3461, Employee Future Benefits, in Part V of the Handbook, to undertake significant additional work to adopt the accounting standards for private enterprises. The AcSB’s Private Enterprises Advisory Committee recommended that Section 1500 be amended to eliminate the unintended consequence.
On September 24, 2010, the AcSB issued an Exposure Draft, “Adoption of Accounting Standards for Private Enterprises — Employee Future Benefits (Proposed amendment to FIRST-TIME ADOPTION, Section 1500).” The Exposure Draft proposed to amend Section 1500 to permit an entity that accounts for its defined benefit plans using the deferral and amortization approach described in Section 3461, Employee Future Benefits, in Part II of the Handbook, to carry forward at the date of transition to accounting standards for private enterprises any unrecognized actuarial gains and losses and past service costs that were determined previously in accordance with Section 3461 in Part V of the Handbook, or an equivalent basis of accounting such as IAS 19 Employee Benefits in Part I of the Handbook.
The proposed amendment would not affect the existing requirement in Section 1500 for entities to recognize any unamortized transitional asset or unamortized transitional obligation in opening retained earnings at the date of transition to the accounting standards for private enterprises.
The AcSB proposed to make the same amendment to Section 1501, First-Time Adoption, in Part III of the Handbook (accounting standards for not-for-profit organizations), and also invited comments on that proposed change. (The accounting standards for not-for-profit organizations were added to Part III of the Handbook in December 2010.)
At its December 2010 meeting, the AcSB discussed comment letters received on its Exposure Draft, and approved amendments to Parts II and III of the Handbook, as proposed in the Exposure Draft. The AcSB also decided to delete the references to Board-authorized implementation guidance in Section 1100, Generally Accepted Accounting Principles, in Part II of the Handbook, and Section 1101, Generally Accepted Accounting Principles for Not-for-Profit Organizations, in Part III of the Handbook, because there is no such guidance for Parts II and III of the Handbook.
The effective date of the changes coincides with the effective date of the applicable standards.
In February 2011, the AcSB issued the amendments to Section 1500 and Section 1100 in Part II of the Handbook, and the amendments to Section 1501 and Section 1101 in Part III of the Handbook.
Disclaimer: This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal ballot process.