ED 115 Australian equivalent to IAS 19 Employee Benefits

17 November 2003

Mr David Boymal
Chairman
Australian Accounting Standards Board
PO Box 204
COLLINS STREET WEST 8007

Dear David

ED 115: Australian equivalent to IAS 19 Employee Benefits

The Group of 100 (G100) is concerned about the implications of the AASB’s decision that the Australian equivalent to IAS 19 Employee Benefits will not include the ‘corridor’ approach option of accounting for actuarial gains and losses in relation to a defined benefit liability.

The G100 strongly disagrees with this decision and believes that the AASB should reconsider this issue because:

a. progress on the related IASB project and the performance reporting project has been slow and it is unlikely that a revised Standard will be in place to be early-adopted in 2005;

b. the IASB due process has not commenced and it is unclear when this will occur. Although the IASB has indicated its intention to remove the ‘corridor’ option those proposals have not been included in an exposure draft and, as such, have not been subject to the public comment process. It is likely that there will be significant opposition to the removal of the ‘corridor’ approach by companies in Europe and the USA; and

c. IASB Standards should be adopted in Australia inclusive of any options. While there are no authoritative Australian requirements a number of Australian companies use a ‘corridor’ approach. Not to adopt the ‘corridor’ approach option would require these companies to make significant changes to accounting policies before the outcome of the IASB projects is known.

The Group of 100 believes that for these reasons the AASB should, in developing an Australian equivalent to IAS 19, retain the corridor approach. In this case whether a company uses the corridor or some other approach to accounting for actuarial gains and losses will be determined in the light of the circumstances applying on first-time adoption of IFRSs.

Yours sincerely

John V Stanhope
National President