EFRAG issues the Discussion Paper “Accounting for Pension Plans with an Asset-Return Promise”

EFRAG has published a discussion paper Accounting for Pensions Plans with an Asset-Return Promise on 15 May 2019 (further information).

The paper addresses alternative accounting treatments for pension plans promising the higher of the return on an identified item or group of items and a minimum guaranteed return.

The discussion paper considers the following three alternatives: (1) the Capped Asset Return approach, (2) the Fair Value Based approach and (3) the Fulfilment Value approach. The effects on the three alternatives are illustrated with a numerical example.

Furthermore, the discussion paper explores the advantages and disadvantages of each approach on the basis of the qualitative characteristics of useful financial information.

Constituents are invited to comment on the evaluation of the alternative accounting treatments and on the questions raised by EFRAG by 15 November 2019.