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The Interpretations Committee tentatively decided not to add the issue to its agenda

 08 April 2015


The Interpretations Committee received a request to clarify whether the future minimum funding requirement for contributions to cover future service would apply for only the minimum fixed period, in the following circumstances:

  1. the contribution rate under the minimum funding arrangement is regularly renegotiated with the pension fund trustees, for example, on an annual or triennial basis;
  2. the agreed amounts of the contributions in the arrangement must then be paid for a fixed period;
    a pension regulation requires the Trustees to prepare funding principles for securing that the statutory funding objective is met;
  3. a pension regulation or a contractual agreement, or both, require the entity and the Trustees to renew the agreement to decide the schedule of contributions regularly under the existing funding principles, if the plan is continued;
  4. this agreement does not need to be renewed if the plan is wound up;
  5. the entity can decide to wind up or close a plan for future accruals, if it agrees with the Trustees; and
  6. neither a plan wind-up nor a plan closure for future accruals has been decided at the end of the reporting period.

The issue could affect the amount of the net defined benefit asset to be recognised in the entity’s statement of financial position.

The Interpretations Committee noted that an entity’s minimum funding requirements at a given date can be analysed into the contributions that are required to cover:

  1. an existing shortfall for past service on the minimum funding basis; and
  2. future service as explained in paragraph BC25 of IFRIC 14

This issue is related to the minimum funding requirement for contributions to cover future service.

The Interpretations Committee also noted that the level of the contributions will be subject to future negotiations, although the entity must continue to make contributions for future service under the existing funding principles, if the plan continues after the minimum period.

When the entity estimates the future minimum funding requirement contributions in the circumstances described, the Interpretations Committee noted that the entity should assume a continuation of the existing funding principles for future service, because:

  1. for any factors not specified by the minimum funding basis (for example, the period to continue the plan is not specified by the existing funding principles), the assumptions for determining future service costs and those used to estimate the future minimum funding requirement contributions for future service must be consistent. This is because paragraphs 17 and 21 of IFRIC 14 require an entity to use assumptions that are consistent with those used to determine the defined benefit obligation and with the situation that exists at the end of the reporting period.
  2. the estimate should not include changes to the funding principles to determine contributions for future service, if such changes require future negotiations with the Trustees, in accordance with paragraphs 21 and BC30 of IFRIC 14.

On the basis of this analysis, the Interpretations Committee determined that, in the light of the existing IFRS requirements, sufficient guidance exists and that neither an Interpretation nor an amendment to a Standard was necessary and therefore [decided] not to add this issue to its agenda.

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