Amendments to accounting standards applicable to employee future benefitsLinkedIn
There, in black and white
NB Bulletin Vol. 16 N. 7, June 2013
The Accounting Standards Board (AcSB) recently approved the final standards on employee future benefits that apply to private enterprises (Part II of the Canadian Institute of Chartered Accountants (CICA) Handbook). Section 3461 will be replaced by Section 3462 for fiscal years beginning on or after January 1, 2014.
Private sector not-for-profit organizations applying Part III of the CICA Handbook will adopt the new Section 3462, with some adjustments to take into account their specific situation.
Understandability, comparability and transparency
The purpose of the amendments is to improve the understandability and transparency of financial information on defined benefit plans for financial statement users, thereby facilitating comparability with other enterprises.
The new standard is consistent with the amendments announced in the exposure draft issued in January 2012. These amendments were discussed in detail in our information bulletin published in February 2012 entitled Proposed amendments to accounting standards applicable to employee future benefits.
New section 3462 will take effect on January 1, 2014; however, early adoption is permitted. The transition to new Section 3462 will be completed through the retrospective application of standards, in accordance with the rules set out in Section 1506, Accounting Changes. Enterprises will adjust results retroactively to plan inception and will immediately and directly recognize the adjustment in retained earnings for the year preceding the first application (without impacting net income). However, an exception is offered to simplify the transition in relation to the elimination of the early measurement provision.
Comparison with international standards applicable to publicly accountable enterprises
New section 3462 will be more closely tied to the revised international accounting standards that took effect on January 1, 2013 (IAS 19 – Part I of the CICA Handbook). However, one significant difference will remain because, under Section 3462, actuarial gains and losses will be recognized in income, whereas, under IAS 19, gains and losses are recognized in other comprehensive income, without affecting the profit or loss.
Comparison with standards applicable to not-for-profit organizations
Private sector not-for-profit organizations applying Part III will adopt new Section 3462 with the following adjustments to take into account their specific situation and the needs of users of their financial statements:
The AcSB plans to issue in mid-2013 an exposure draft on accounting for employee future benefits by private sector not-for-profit organizations that will integrate the two adjustments listed above. This new version of Section 3462 of Part III should be published in time to allow for its adoption as of January 1, 2014.
Please feel free to contact us for additional information.
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