Effect of change in law on RBO

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Hussein
Posts: 15
Joined: 10 Oct 2022, 22:59

Effect of change in law on RBO

Post by Hussein »

The government has changed a section of a law whereby the formula used to calculate retirement gratuity on retirement for employees has changed. The effect is that if an employee retires, the new formula will be used to calculate his retirement gratuity from the date he was employed; the old formula will not be considered at all. In a sense, the effect of the change in law is retrospective.

As such, the amount of retirement benefit obligation in the financial statement will have to be recalculated to be in line with the new formula.

Issue: How should the change in the RBO Liability be accounted for in the financial statements? As a restatement in line with IAS 8 (3 column balance sheet) or put the whole effect of the change in the current year (no need to change comparative) or change the comparative silently?

Please note that the amount is material.
JRSB
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Re: Effect of change in law on RBO

Post by JRSB »

would seem odd to change the comparative for a law that didn't exist at the previous balance sheet date. current year catchup with explanatory note.
Hussein
Posts: 15
Joined: 10 Oct 2022, 22:59

Re: Effect of change in law on RBO

Post by Hussein »

Hi JRSB,

Thanks for the reply. I completely agree with your view.

Is there any IFRS literature / references which I can use to back this?
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Marek Muc
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Re: Effect of change in law on RBO

Post by Marek Muc »

I also agree, it's definitely a current year event without any retrospective restatements

https://ifrscommunity.com/knowledge-bas ... rvice-cost
Hussein
Posts: 15
Joined: 10 Oct 2022, 22:59

Re: Effect of change in law on RBO

Post by Hussein »

Thanks Marek, that helped
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