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Normandin Beaudry

The exposure draft on employee future benefits issued by the Accounting Standards Board


There, in black and white

NB Bulletin Vol. 10 N. 5. April 2007

On March 30, the Accounting Standards Board (AcSB) issued an exposure draft to amend Section 3461 (Employee Future Benefits) of the Canadian Institute of Chartered Accountant’s (CICA) Handbook. These amendments, which are modeled after the new US standards (Statement of Financial Accounting Standards No. 158) issued in September 2006, aim to improve the transparency and uniformity of companies’ balance sheets.

Please note that, in spite of simplification efforts, given the subject matter and use of terms defined in Section 3461, this document contains technical content.

The highlights of the exposure draft are as follows:


  • The amendments proposed by the AcSB would apply to all defined benefit plans (including post-retirement benefits other than pension and post-employment benefits) for all types of organizations, contrary to the provisions of SFAS 158, which do not apply to post-employment benefits.
  • The majority of provisions would be effective for fiscal years ending on or after December 31, 2007 for publicly accountable enterprises and not-for-profit organizations, and December 31, 2008 for non-publicly accountable enterprises. These provisions could, however, be adopted at an earlier date.
  • Persons interested in submitting comments on the AcSB’s proposed amendments to Section 3461 must do so by June 30, 2007. The AcSB expects to issue the final amended standard in the second half of 2007.

Recognition of funded status in the balance sheet  

  • Funded status (difference between the fair value of plan assets and the accrued benefit obligation) would be recognized in the balance sheet. Funded status is currently disclosed in the notes to the financial statements.
  • Upon initial application of these new provisions, amounts that have not been accounted for in cost recognized at fiscal year end (unamortized amounts) would be recognized as components of the closing balance for accumulated other comprehensive income (OCI).
  • Recognition of the funded status in the balance sheet would improve the transparency of the funded status of defined benefit plans because financial statement users would no longer need to consult the notes to find this information. The impact of this type of measure on the balance sheet would depend, among other things, on the current funded status of the plan and the size of the unamortized amounts (actuarial gains and losses, past service costs and transitional asset or obligation). Because the financial ratios would be changed, some organizations would be forced to review their financial arrangements.

Cost recognized

  • The cost recognized would not be affected. However, because cost recognized includes amortization amounts already reflected in the funded status, an adjustment would be recorded in the OCI.

Valuation allowance

  • The valuation allowance, which is not included in the US standards, would remain unchanged. Any changes in valuation allowance would, however, be recorded as debits or credits to the OCI.

Measurement date

  • Going forward, companies would be required to measure the plan assets and accrued benefit obligations as of the balance sheet date. This would eliminate the possibility of using a measurement date that falls within the three-month period preceding the fiscal year end date. Provisions regarding the measurement date would be effective for fiscal years ending on or after December 31, 2008.
  • As indicated in Bulletin No. 14, Vol. 9 in December 2006, our analyses reveal that approximately one quarter of companies were using a measurement date different than the fiscal year end date. The AcSB’s proposed amendments to the measurement date would require companies to adopt a tighter schedule for finalizing their financial statements.


  • With the exception of information to be disclosed in the financial statements, which would be adjusted after the proposed amendments are implemented, no disclosure requirements would be added.

Other findings

  • Despite the convergence toward the US SFAS 158 standards in the short-term, the CICA has reaffirmed its intention to converge the Canadian standards toward the international standards (that differ from the US standards) by 2011. We can therefore expect other changes between now and 2011.

Please feel free to contact us for additional information.

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