Accounting standards applicable to employee future benefits: what Quebec-based companies do?LinkedIn
There, in black and white
NB Bulletin Vol. 15 N. 15, December 2012
Several private sector companies will soon be finalizing their budgets for the upcoming fiscal year and preparing their financial statements for the current fiscal year. These must include the recognition of the costs for defined benefit pension plans (DB plans) and for group insurance plans offered to retirees (other post-retirement benefits).
The assumptions required to determine the accrued benefit obligation and the annual expense must be established by the company’s management. For the eighth consecutive year, we have analyzed the annual reports of Quebec-based companies listed on the S&P/TSX Index whose fiscal year was ending between September 30 of the previous year and March 31 of the current year. All of these companies sponsored at least one DB plan and the majority of them offered other post-retirement benefits.
Our analysis is divided into three sections. The first section presents the assumptions used by the companies included in our analysis in percentile format. The tables present a comparison of the assumptions used for fiscal years ending in 2011 (between September 30, 2011 and March 31, 2012) and in 2010 (between September 30, 2010 and March 31, 2011). The second section summarizes the findings from these tables and from our data analysis. The third and final section presents our comments with respect to some measures that could potentially impact future results.
We invite you to consult the “Publications” section of our website to review the results, findings and comments for previous years. However, given that the composition of the S&P/TSX Index varies regularly based on predefined criteria, the group of companies analyzed this year may differ from that analyzed in prior years.
1. Selection of assumptions
The tables present, in percentile format, the key economic assumptions used by companies for DB plans and other post-retirement benefits. The assumptions are those that were in effect at the end of the fiscal year considered and were used to calculate the accrued benefit obligation at the end of the fiscal year. However, the assumption used for the expected long-term rate of return on assets is the one that was in effect at the beginning of the fiscal year considered and was used to calculate the annual expense for that fiscal year. The other assumptions that were used to calculate the annual expense for the fiscal year are those at the end of the previous fiscal year.
3. Additional comment
Amendments to accounting standards applicable to employee future benefits
At the beginning of this year, in a There, in black and white bulletin, we informed you of the proposed amendments to the Canadian accounting standards for private enterprises and private sector not-for-profit organizations applicable for fiscal years beginning on or after January 1, 2014. The purpose of the published exposure draft by the Accounting Standards Board (AcSB) was to improve the understanding, comparability and transparency of financial information on defined benefit plans for financial statement users. Following this publication, the AcSB is currently discussing the comments received and clarifications to be added in the final version of the revised standards. The AcSB plans to publish the final standards during the second quarter of 2013.
Also, we remind you that there are amendments applicable to the international accounting standards (IAS 19) for fiscal years beginning on or after January 1, 2013.
For more information, we invite you to consult our bulletins:
Please feel free to contact us for additional information.
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