September 2019

Accounting standards applicable to employee future benefits for private enterprises and private sector NFPOs: proposed modifications regarding the use of a funding valuation

As mentioned in our bulletin last June, the Accounting Standards Board (AcSB) issued a few days ago an exposure draft proposing modifications to Section 3462 (“Employee Future Benefits”) for organizations electing to use a funding valuation to prepare their accounting results. This bulletin will be of particular interest to those who prepare financial statements in the private sector for a private enterprise or a not-for-profit organization (NFPO).

For defined benefit plans with a funding valuation requirement (e.g. registered pension plans) using a funding valuation for their accounting results:

  • The proposed modifications would necessitate taking into account all funding requirements, including the stabilization provision in Quebec and the provision for adverse deviations in Ontario, in the measurement of the defined benefit obligation.

For defined benefit plans without a funding valuation requirement (e.g. unfunded supplementary pension plans or group benefits plans at retirement):

  • The proposed modifications would remove the option to determine accounting results using a funding valuation “approach” and, therefore, an accounting valuation would be required.

The proposed modifications are further to an issue raised in 2018 regarding the diversity in the practices as to whether the stabilization provision or the provision for adverse deviations is included in the accounting results.

Transitional provisions are proposed and, if the AcSB process goes ahead as planned, the modifications would apply to the fiscal years beginning on or after January 1, 2021 (with earlier application permitted).

You can read the exposure draft for more information and submit your comments, if any, by December 16, 2019.

Would you like more information?
Contact your Normandin Beaudry consultant or email us.