• IAS 32 Financial Instruments: Presentation and Disclosure

History

• IFRIC D9 Issued 8 July 2004
• Comment Deadline 21 September 2004
• The draft Interpretation is available publicly on IASB's Website.
• Click for Press Release (PDF 25k).

Deloitte Letter of Comment on IFRIC D9

• Our comment letters are Posted Here.

Draft Interpretations are proposals that are not yet final.

D9 proposes guidance on how IAS 19 Employee Benefits should be applied to employee benefit plans with a promised return on actual or notional contributions. Examples of such plans are:

• (a) a plan in which a contribution is made each year based on the employee's current salary and the employee receives a benefit (a lump sum or an annuity) equal to the contributions plus the higher of (i) the actual return generated on the contributions and (ii) a minimum fixed return on the contributions over the period to when the benefit is paid; and
• (b) a plan in which the promised benefit is a notional contribution each year plus a return on the notional contribution that is the higher of (i) the return based on specified assets, for example the return on quoted bonds, and (ii) a fixed return, for example 4%. The plan may or may not hold assets.

D9 argues that such plans are defined benefit plans and proposes guidance on the treatment of the following benefits:

• (a) a guarantee of a fixed return,
• (b) a benefit that depends on future asset returns, and
• (c) a combination of (a) and (b).

D9 proposes that the liability for a benefit of a guarantee of a fixed return should be determined by projecting forward the contributions at the guaranteed fixed return to estimate the amount that will ultimately be paid. That amount should be discounted back to a present value using the high-quality corporate bond rate required by IAS 19. In contrast, for benefits that depend on future asset returns, D9 proposes that an estimate of the amount that will ultimately be paid should not be made. Instead, the liability should be determined by the value of the assets at the balance sheet date. Lastly, D9 proposes that the liability for a benefit that combines a guaranteed fixed return and the returns on future assets should be the higher of the liabilities for each separate element.