23 May 2003

Mr Greg Pound
Chief Accountant
Australian Securities & Investments Commission
485 LaTrobe Street (Level 20)
MELBOURNE 3000

Dear Greg

Defined Benefit Plans

The Group of 100 is concerned about some of the implications of ASIC announcement 03-127 (15 April 2003) for financial reporting by corporate sponsors of defined benefit superannuation plans. While we acknowledge that drawing attention to the requirements of AASB 1028 ‘Employee Benefits’ in the current environment focuses the attention of preparers we do not agree with the ASIC view that a deficit in a plan automatically results in a liability on the part of the corporate sponsor.

A basis of our concern is that ASIC has not explained the reasons for now adopting this view, which is at variance with a significant body of current practice.

In the absence of an Australian Standard requiring the recognition of surpluses and deficits of defined benefit pension plans, and the grounds for the ASIC view, the Group of 100 is concerned that ASIC is applying a particular interpretation of the hierarchy in AASB 1001 ‘Accounting Policies’, paragraph 4.1.2 and how that interpretation might be applied in other circumstances.

The Group of 100 believes that companies will continue to make judgments about the recognition of assets and liabilities in the context of their current arrangements and in complying with the requirements of AASB 1028. It is also noteworthy that the under the Year 2005 strategy the AASB is likely to adopt IAS 19 ‘Employee Benefits’ with effect from 1 January 2005.

Yours sincerely

John V Stanhope
National President

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