IFRIC 14 OCI Adjustments

[Ketan Marwah]

Dear All,

I am trying to figure out instances as part of IFRIC 14 guidance where an adjustment in respect of the minimum funding requirement would be made via OCI. The two cases which I have "heard" of in this specific aspect are the following (I have also shared my views beside sharing the reference that I think is appropriate for the scenarios). Please share your views about the two cases OR if you are aware of any other cases where the minimum funding requirement is provided for via OCI:

1) When the minimum funding requirement relates to past service cost but there is no unconditional right to claim refund for the required contribution:

Reference for such a scenario: Similar to provision for Onerous contracts.
IFRIC 14 BC33 & 35 - the reference uses IAS 37 principles towards making such adjustment thus it doesn't support an adjustment via OCI.

BC33 Therefore, the IFRIC concluded that when an entity has an obligation under a minimum funding requirement to make additional contributions to a plan in respect of services already received, the entity should reduce the asset or increase the liability recognised in the statement of financial position to the extent that the minimum funding contributions payable to the plan will not be available to the entity either as a refund or a reduction in future contributions.
BC35 The IFRIC did not agree that the Interpretation extends the application of paragraph 64 of IAS 19. Rather, it applies the principles in IAS 37 relating to onerous contracts in the context of the requirements of IAS 19, including paragraph 64. On the question whether the liability falls within the scope of IAS 19 or IAS 37, the IFRIC noted that employee benefits are excluded from the scope of IAS 37. The IFRIC therefore confirmed that the interaction of a minimum funding requirement and the limit on the measurement of the defined benefit asset could result in a decrease in a defined benefit asset or an increase in a defined benefit liability.

2) When an interaction is established with the defined benefit assets for the minimum funding requirement but it is for the future service cost:

Reference for such scenario: Illustrative Example 3: IE18 - Not fully sure if a reference to paragraph 58(b) would imply a similar treatment as used for re-measurement of defined benefit plans

IE18 Assuming a discount rate of 6 per cent, the present value of the economic benefit available as a future contribution reduction is equal to: (2)/(1.06) + 0/(1.06)2+ 2/(1.06)3+ 4/(1.06)4+ ... + 4/(1.06)50+ .... = 56.
Thus in accordance with paragraph 58(b) of IAS 19, the present value of the economic benefit available from future contribution reductions is limited to 56.

[Marek Muc]

Hi Ketan, I'm afraid that IFRIC 14 is too specialised, even for IFRS aficionados...