which are based on market conditions at the year end, and demographic assumptions such as life expectancy.
c
The actuarial loss or gain arising from experience adjustments on defined benefit liabilities represents the impact on
the liabilities of differences between actual experience during the year compared with the assumptions made at the
start of the year. Such differences might arise, for example, from members choosing different benefit options at
retirement, actual salary increases being different from those assumed or actual benefit increases being different to the pension increase assumption.
The fair value of the plan assets should be disaggregated into classes that distinguish
the nature and risks of those assets, subdividing each class of plan asset into those
that have a quoted market price in an active market (as defined in IFRS 13, see
Chapter 14) and those that do not. For example, and considering the level of detail of
disclosure, aggregation and emphasis discussed at 15.2 above, an entity could
distinguish between:
(a) cash and cash equivalents;
(b) equity instruments (segregated by industry type, company size, geography etc.);
(c) debt instruments (segregated by type of issuer, credit quality, geography etc.);
(d) real estate (segregated by geography etc.);
(e) derivatives (segregated by type of underlying risk in the contract, for example,
interest rate contracts, foreign exchange contracts, equity contracts, credit
contracts, longevity swaps etc.);
(f) investment funds (segregated by type of fund);
(g) asset-backed
securities;
and
(h) structured
debt.
[IAS 19.142].
The fair value of an entity’s own transferable financial instruments held as plan assets,
and the fair value of plan assets that are property occupied by, or other assets used by,
the entity should be disclosed. [IAS 19.143].
2832 Chapter 31
The following extract from Diageo plc illustrates how the plan assets may be disaggregated.
Extract 31.3: Diageo plc (2016)
OPERATING ASSETS AND LIABILITIES [extract]
13.
Post employment benefits [extract]
(c) Investment and hedging strategy [extract]
2016
2015
United
United
United
States
United
States
Kingdom Ireland
and other
Total
Kingdom Ireland
and other
Total
£ million
£ million
£ million
£ million
£ million
£ million
£ million
£ million
Equities
Quoted
992 433 253
1,678 812 395 254
1,461
Unquoted and
private equity
321 3 20
344
297 2
18
317
Bonds
Fixed-interest
government
206 158 46 410 178 117 37 332
Inflation-linked
government
977 178
–
1,155 826 133 9 968
Investment
grade corporate
980 225 314
1,519 861 210 251
1,322
Non-investment
grade
219 43 12 274 265 31 14
310
Loan securities
602 140
– 742 614 123 – 737
Repurchase
agreements
2,000 – –
2,000
1,980 – –
1,980
Liability driven
investment (LDI)
114 24 – 138 80 20 –
100
Property – unquoted
670 108
1 779 665 83 10
758
Hedge funds
– 142
– 142
– 122 – 122
Interest rate and
inflation swaps
(1,007) 15 – (992)
(801) 50 –
(751)
Cash and other
(27) 3 91 67
145 9
73
227
Total bid value of
assets
6,047 1,472 737 8,256 5,922 1,295 666 7,883
(1) The asset classes include some cash holdings that are temporary. This cash is likely to be invested imminently and
so has been included in the asset class where it is anticipated to be invested in the long term.
(2) Within the Irish Scheme’s plan assets above there is £0.6 million (2015 – £0.6m) invested in the ordinary shares of
Diageo plc.
Employee
benefits
2833
An entity should disclose the significant actuarial assumptions used to determine the present
value of the defined benefit obligation. Such disclosure should be in absolute terms (e.g. as an
absolute percentage, and not just as a margin between different percentages and other
variables). When an entity provides disclosures in total for a grouping of plans, it should
provide such disclosures in the form of weighted averages or relatively narrow ranges.
[IAS 19.144].
15.2.3
Amount, timing and uncertainty of future cash flows
An entity should disclose:
(a) a sensitivity analysis for each significant actuarial assumption as of the end of the
reporting period, showing how the defined benefit obligation would have been
affected by changes in the relevant actuarial assumption that were reasonably
possible at that date;
(b) the methods and assumptions used in preparing the sensitivity analyses required
by (a) and the limitations of those methods; and
(c) changes from the previous period in the methods and assumptions used in
preparing the sensitivity analyses, and the reasons for such changes. [IAS 19.145].
A description should be given of any asset-liability matching strategies used by the plan
or the entity, including the use of annuities and other techniques, such as longevity
swaps, to manage risk. [IAS 19.146].
To provide an indication of the effect of the defined benefit plan on the entity’s future
cash flows, an entity should disclose:
(a) a description of any funding arrangements and funding policies that affect future
contributions;
(b) the expected contributions to the plan for the next annual reporting period; and
(c) information about the maturity profile of the defined benefit obligation. This will
include the weighted average duration of the defined benefit obligation and may
include other information about the distribution of the timing of benefit payments,
such as a maturity analysis of the benefit payments. [IAS 19.147].
2834 Chapter 31
The following extract from BT Group plc illustrates the maturity profile of the defined
benefit obligation.
Extract 31.4: BT Group plc (2016)
Notes to the consolidated financial statements [extract]
20 Retirement benefit plans [extract]
Forecast benefits payable by the BTPS at 31 March 2016 (unaudited)
£bn
£bn
a
3.0
<
br /> 60
TPS
2.5
he B
50
y t
2.0
e b
a
40
s
blya
itie
1.5
30
fits pa
Liabil
1.0
ne
20
be
0.5
10
Forecast
0
0
2016
2036
2056
2076
2096
Forecast benefit payments (Left axis)
Liabilities (Right axis)
a Based on accrued benefits to date.
15.2.4 Multi-employer
plans
If an entity participates in a multi-employer defined benefit plan, different disclosures
are required depending upon how the arrangement is accounted for. These are
discussed below.
15.2.4.A
Plans accounted for as defined benefit plans
If an entity participates in a multi-employer defined benefit plan and accounts for it
as such, it should make all the required disclosures discussed above. In addition, it
should disclose:
(a) a description of the funding arrangements, including the method used to determine
the entity’s rate of contributions and any minimum funding requirements;
(b) a description of the extent to which the entity can be liable to the plan for other
entities’ obligations under the terms and conditions of the multi-employer plan;
(c) a description of any agreed allocation of a deficit or surplus on:
(i) wind-up of the plan; or
(ii) the
entity’s
withdrawal from the plan. [IAS 19.148].
Employee
benefits
2835
15.2.4.B
Plans accounted for as defined contribution plans
If an entity accounts for a multi-employer defined benefit plan as if it were a defined
contribution plan, it should disclose the following, in addition to the information
required by 15.2.4.A above and instead of the disclosures normally required for defined
benefits and discussed in 15.2 to 15.2.3 above:
(a) the fact that the plan is a defined benefit plan;
(b) the reason why sufficient information is not available to enable the entity to
account for the plan as a defined benefit plan;
(c) the expected contributions to the plan for the next annual reporting period;
(d) information about any deficit or surplus in the plan that may affect the amount of
future contributions, including the basis used to determine that deficit or surplus
and the implications, if any, for the entity; and
(e) an indication of the level of participation of the entity in the plan compared with
other participating entities. Examples of measures that might provide such an
indication include the entity’s proportion of the total contributions to the plan or
the entity’s proportion of the total number of active members, retired members,
and former members entitled to benefits, if that information is available. [IAS 19.148].
15.2.5
Defined benefit plans that share risks between entities under
common control
If an entity participates in a defined benefit plan that shares risks between entities under
common control, the entity should disclose:
(a) the contractual agreement or stated policy for charging the net defined benefit cost
or the fact that there is no such policy; and
(b) the policy for determining the contribution to be paid by the entity. [IAS 19.149].
Further disclosures are required depending upon how the arrangement is accounted for.
These are discussed below.
15.2.5.A
Plans accounted for as defined benefit plans
If an entity participates in a defined benefit plan that shares risks between entities under
common control and accounts for an allocation of the net defined benefit cost, it should
also disclose all the information about the plan as a whole set out in 15.2 to 15.2.3 above.
[IAS 19.149].
15.2.5.B
Plans accounted for as defined contribution plans
If an entity participates in a defined benefit plan that shares risks between entities under
common control and accounts for the net contribution payable for the period, it should
also disclose the information set out below. [IAS 19.149].
The standard requires disclosure of information that:
(a) explains the characteristics of its defined benefit plans and risks associated with them;
(b) identifies and explains the amounts in its financial statements arising from its
defined benefit plans; and
2836 Chapter 31
(c) describes how its defined benefit plans may affect the amount, timing and
uncertainty of the entity’s future cash flows.
To meet the objectives above, the standard requires consideration of all the following:
(a) the level of detail necessary to satisfy the disclosure requirements;
(b) how much emphasis to place on each of the various requirements;
(c) how much aggregation or disaggregation to undertake; and
(d) whether users of financial statements need additional information to evaluate the
quantitative information disclosed. [IAS 19.136].
If the disclosures provided in accordance with the requirements in IAS 19 and other
IFRSs are insufficient to meet the objectives above, an entity should disclose additional
information necessary to meet those objectives. For example, an entity may present an
analysis of the present value of the defined benefit obligation that distinguishes the
nature, characteristics and risks of the obligation. Such a disclosure could distinguish:
(a) between amounts owing to active members, deferred members, and pensioners;
(b) between vested benefits and accrued but not vested benefits; and
(c) between conditional benefits, amounts attributable to future salary increases and
other benefits. [IAS 19.137].
IAS 19 requires disclosure of:
(a) information about the characteristics of its defined benefit plans, including:
(i)
the nature of the benefits provided by the plan (e.g. final salary defined benefit
plan or contribution-based plan with guarantee);
(ii) a description of the regulatory framework in which the plan operates, for
example the level of any minimum funding requirements, and any effect of
the regulatory framework on the plan, such as the asset ceiling; and
(iii) a description of any other entity’s responsibilities for the governance of the
plan, for example responsibilities of trustees or of board members of the plan;
(b) a description of the risks to which the plan exposes the entity, focused on any
unusual, entity-specific or plan-specific risks, and of any significant concentrations
of risk. For example, if plan assets are invested primarily in one class of
investments, e.g. property, the plan may expose the entity to a concentration of
property market risk; and
(c) a description of any plan amendments, curtailments and settlements.
The fair value of the plan assets should be disaggregated into classes that distinguish the
nature and risks of those assets, subdividing each class of plan asset into those
that have a
quoted market price in an active market (as defined in IFRS 13, discussed in Chapter 14)
and those that do not. For example, and considering the level of detail of disclosure,
aggregation and emphasis discussed at 15.2 above, an entity could distinguish between:
(a) cash and cash equivalents;
(b) equity instruments (segregated by industry type, company size, geography etc.);
(c) debt instruments (segregated by type of issuer, credit quality, geography etc.);
(d) real estate (segregated by geography etc.);
Employee
benefits
2837
(e) derivatives (segregated by type of underlying risk in the contract, for example,
interest rate contracts, foreign exchange contracts, equity contracts, credit
contracts, longevity swaps etc.);
(f) investment funds (segregated by type of fund);
(g) asset-backed
securities;
and
(h) structured
debt.
[IAS 19.142].
The fair value of the entity’s own transferable financial instruments held as plan assets,
and the fair value of plan assets that are property occupied by, or other assets used by,
the entity should be disclosed. [IAS 19.143].
An entity should disclose the significant actuarial assumptions used to determine the
present value of the defined benefit obligation. Such disclosure should be in absolute
terms (e.g. as an absolute percentage, and not just as a margin between different
percentages and other variables). When an entity provides disclosures in total for a
grouping of plans, it shall provide such disclosures in the form of weighted averages or
relatively narrow ranges.
To provide an indication of the effect of the defined benefit plan on the entity’s future
cash flows, an entity should disclose:
(a) a description of any funding arrangements and funding policy that affect future
contributions; and
(b) the expected contributions to the plan for the next annual reporting period.
The information described in 15.2.5.A and 15.2.5.B must be presented in the entity’s own
accounts. The rest of the information discussed in this section may be disclosed by
cross-reference to disclosures in another group entity’s financial statements if:
(a) that group entity’s financial statements separately identify and disclose the
information required about the plan; and
(b) that group entity’s financial statements are available to users of the financial
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 565
