Scope of application

1 This Standard IAS 26 applies to the financial statements of pension plans by entities that prepare such financial statements.

2 Pension plans are sometimes called by other names, such as “pension schemes”, “superannuation schemes” or “superannuation schemes”. pension provision" This Standard treats the benefit plan as a reporting entity that is separate from the employers of the plan participants. All other standards apply to the financial statements of benefit plans to the extent that they are not covered by the provisions of this standard.

3 This Standard applies to plan accounting and reporting for all participants as a group.
It does not apply to reporting to individual plan participants regarding their pension rights.

4 IAS 19 "Employee Benefits" examines the determination of pension costs in the financial statements of employers with pension plans. This Standard therefore complements IAS 19.

5 Pension plans are divided into pension plans with defined contributions and pension plans with defined benefits. Many require the creation of separate funds, which may or may not be established as a separate legal entity, and which may or may not have trustees to whom contributions are paid and pensions are paid. This Standard applies regardless of whether such a fund is established and regardless of whether there are trustees.

6 Pension plans whose assets are invested in Insurance companies, must meet the same accounting and funding requirements as private investment agreements. Accordingly, they are in the scope of application this standard, unless the contract with the insurance company is made on behalf of a specific participant or group of participants in the pension plan and the obligations under the pension plans are obligations solely of the insurance company.

7 This Standard does not apply to other forms of employee benefits, such as severance benefits, deferred compensation arrangements, long service benefits, special early retirement or redundancy plans, health and accident insurance schemes or insurance schemes. bonuses. Agreements within state system social security are also excluded from the scope of this standard.

Definitions

8 In this standard IAS 26 The following terms are used with the meanings indicated:

Pension plans- these are agreements under which an enterprise provides payments to its employees during or after the end of their employment (in the form of annual income or in the form of a lump sum payment). Moreover, such payments, as well as contributions to ensure them, can be determined or calculated in advance of retirement, both in accordance with the documents and on the basis of the practice adopted at the enterprise.

Defined Contribution Pension Plans are pension plans under which the pension amounts payable are determined on the basis of contributions to a pension fund and subsequent investment earnings.

Defined benefit plans- These are pension plans under which the amount of pension payable is determined by a formula, which is usually based on the amount of remuneration received by the employee and/or length of service.

Funding - is a transfer of assets to another enterprise (fund ), independent of the employer's enterprise, to cover future pension obligations.

The following terms are also used in this standard:

Participants - these are members of the pension plan, as well as other persons entitled to receive payments under this plan.

Net assets of the pension plan serving as a source of benefits are pension plan assets less liabilities other than the actuarial present value of pension benefits due.

is the present value of expected pension plan benefits due to retired and active employees based on the services they have already provided.

Unconditional payments - these are payments the right to receive under the terms of the pension plan does not depend on the continuation of the employment relationship.

9 Some pension plans have non-employer sponsors. This Standard also applies to the financial statements of such plans.

10 Most pension plans are based on formally concluded contracts. Some plans are informal in nature but acquire some degree of commitment as a result of employers' work practices. Although some pension plans allow employers to limit the plan's liability, annulling a pension plan is generally difficult because employers want to retain employees. Informal pension plans are subject to the same accounting and reporting practices as formal plans.

11 Many pension plans establish separate funds into which contributions are made and from which payments are made. Such funds may be managed by persons who independently manage the assets of the funds. In some countries these persons are called trustees. The term “trustee” is used in this Standard to refer to such persons, regardless of whether a formal trust has been created.

12Pension plans are typically defined contribution plans or defined benefit plans, each with its own distinctive features. Sometimes there may be plans that have properties of both options. For the purposes of this Standard, such hybrid plans are treated as defined benefit plans.

Defined Contribution Pension Plans

13 The financial statements of a defined contribution plan include a statement of the plan's net assets that provide benefits and a description of the plan's funding policies.

14 In a defined contribution plan, the amount of future benefits to participants is determined by the contributions of the employer, the participant, or both parties to the pension fund, as well as the operating performance and investment returns of the fund. The employer's obligations are usually limited to contributions to the pension fund. An actuarial consultation is generally not required, although it is sometimes used to estimate the amount of future benefits that can be provided based on current contributions and various levels of future contributions and investment income.

15 Participants have an interest in plan performance because it directly affects the level of their future benefits. Participants are also interested in information about whether contributions to the pension fund have been received and whether adequate controls are in place to protect the rights of beneficiaries. The employer, in turn, is interested in the efficient and fair operation of the plan.

16 The purpose of defined contribution plan reporting is to provide periodic information about the plan and the results of its investment activities. Typically this goal is achieved by providing financial statements that contain the following information:

• (c) description of investment policy.

Defined benefit plans

17 The financial statements of a defined benefit plan include one of the following statements:

• (a) a report showing:
  • (i) the net assets of the pension plan that serve as the source of benefits;
  • (ii) the actuarial present value of pension benefits due, distinguished between unconditional and non-conditional benefits; And
  • (iii) the resulting excess or deficit; or
• (b) a statement of the plan's net assets serving as the source of benefits, including one of two:
  • (i) a note showing the actuarial present value of pension benefits due, distinguished between unconditional and non-conditional benefits; or
  • (ii) a reference to this information in the accompanying actuary's report.

If an actuarial valuation has not been prepared at the date of the financial statements, the most recent available valuation is used as the basis, followed by the date on which it was made.

18 For the purposes of paragraph 17, the actuarial present value of pension benefits due is based on benefits due to employees under the terms of the plan for services provided to at this moment, using either current or predicted levels in calculations wages and with disclosure of the method used. The impact of any changes in actuarial assumptions that have a significant effect on the actuarial present value of pension benefits due is also disclosed.

19 The financial statements explain the relationship between the actuarial present value of pension benefits due and the net assets of the pension plan that serve as the source of benefits, as well as the policy for funding the benefits due.

20 In a defined benefit plan, the amount of pension benefits due depends on financial situation plan and the ability of investors to make future contributions to it, as well as the investment results and operating performance of the plan.

21 A defined benefit plan periodically requires consultation with an actuary for evaluation. financial condition plan, reviewing actuarial assumptions and obtaining recommendations regarding future contribution levels.

22 The purpose of reporting a defined benefit plan is to provide periodic information about financial resources and plan performance, which may be useful in assessing the relationship between resource accumulation and plan benefits over time. Typically this goal is achieved by providing financial statements that contain the following information:

• (a) a description of significant activity during the period and the effect of any changes relating to the plan, its membership, terms and conditions;
• (b) statements of operations and investment results for the period and the financial position of the plan at the end of the period; And
• (c) actuarial information presented either as part of the accounts or as a separate report; (d) description of investment policy.

Actuarial present value of pension benefits due

23 The present value of expected benefits under a pension plan may be calculated and reported either on the basis of current wage levels or on the basis of projected wage levels until the plan participants retire.

24 Reasons for preferring the method based on the current level of wages:

• (a) the actuarial present value of pension benefits due, being the sum of the amounts currently attributable to each plan participant, can be calculated more objectively than from projected salary levels because it contains fewer assumptions;
• (b) benefit increases associated with salary increases become an obligation of the pension plan at the time the salary increases; And
• (c) the amount of the actuarial present value of pension benefits due, based on current salary levels, is generally more closely linked to the amount that would be payable in the event of a participant's withdrawal or termination of the plan.

25 Reasons according to which preference is given to the method based on the projected level of wages:

• (a) financial information must be prepared on a going concern basis, regardless of any necessary assumptions or estimates;
• (b) for plans using the last salary principle, the benefit is determined based on wages at or shortly before retirement, so wages, contribution levels and rates of return must be projected; And
• (c) failure to include wage projections when most of the funding pension fund relies on these values ​​may result in reporting being overfunded when in fact it is not, or reporting sufficient funding when the plan is actually underfunded.

26 The actuarial present value of pension benefits entitlement, based on current salary levels, is disclosed in the financial statements of a pension plan to show the earned benefit obligation as of the date of the financial statements. The actuarial present value of pension benefits due, based on projected salary levels, is disclosed to reflect the magnitude of the potential liability on a going concern basis, which is typically the basis of funding. In addition to disclosing the actuarial present value of pension benefits due, extensive explanation may be required to clearly show the context in which the actuarial present value should be taken. This explanation may take the form of information about the adequacy of planned future funding for the pension plan and about funding policies based on wage forecasts. This information may be included in the financial statements or in the actuary's report.

Frequency of actuarial valuations

27 In many countries, actuarial valuations are carried out no more than once every three years. If an actuarial valuation has not been prepared at the date of the financial statements, the most recent available valuation is used as the basis, followed by the date on which it was made.

28 For defined benefit plans, the information is shown in one of the following formats, which reflect the different methods of disclosure and presentation of actuarial data that have developed in practice:

• (a) the financial statements include a statement showing the plan's net assets from which benefits are sourced, the actuarial present value of the benefit payments due and the resulting surplus or deficit. The financial statements of a benefit plan also report changes in the plan's net assets that provide benefits and changes in the actuarial present value of the benefit benefits due. The financial statements may be accompanied by a separate actuarial report justifying the actuarial present value of the pension benefits due;
• (b) financial statements, which includes a statement of net benefit plan assets and a statement of changes in net benefit plan assets. The actuarial present value of pension benefits due is disclosed in a note to the accounts. The financial statements may be accompanied by an actuary's report justifying the actuarial present value of pension benefits due; And
• (c) financial statements that include a statement of net benefit assets and a statement of changes in net benefit assets, the actuarial present value of the benefit payable being presented in a separate actuary's report.

In each format, the financial statements may also be accompanied by a trustees' report, presented on the basis of a management or directors' report, and an investment report.

29 Proponents of the formats described in paragraphs 28(a) and (b) believe that the quantification of pension benefits due and other information provided by such approaches helps users assess the current status of the plan and the likelihood of meeting its obligations. They also believe that financial statements should be complete in themselves and should not rely on accompanying statements. However, some practitioners believe that the format described in paragraph 28(a) may create the impression that a liability exists when, in their view, the actuarial present value of the pension benefits due does not have all the characteristics of a liability.

30 Proponents of the format described in paragraph 28(c) believe that the actuarial present value of pension benefits owed should not be included in the statement of net assets of the benefit plan as required by the format described in paragraph 28(a). or even simply disclosed in a note, according to the format provided in paragraph 28(b), because it will be compared directly to plan assets and such a comparison may not be reasonable. They argue that actuaries may not compare the actuarial present value of pension benefits owed to the market value of the investment, but may instead estimate the present value of the flows Money expected from investments. Therefore, proponents of this format believe that such a comparison is unlikely to reflect the actuary's overall assessment of the plan and may be misunderstood. Some also believe that information about pension benefits due, whether or not presented in numerical terms, should only be contained in a separate actuarial report, which may include an appropriate explanation.

31 This Standard adopts the view that it is permissible to disclose information regarding pension benefits due in a separate actuary's report. The Standard rejects arguments against quantifying the actuarial present value of pension benefits due. Accordingly, this Standard considers the formats described in paragraphs 28(a) and (b) to be acceptable, as well as the format described in paragraph 28(c), if the financial statements contain a reference to, and are accompanied by, an actuarial report. present value of pension benefits due.

All plans

Valuation of plan assets

32 Pension plan investments are accounted for at fair value. Fair value of market valuable papers is their market value. If there are pension plan investments for which fair value cannot be measured, the reason why fair value is not used is disclosed.

33 The fair value of marketable securities is usually taken to be their market value as the most appropriate measure of the valuation of securities at the date of reporting and the results of investment activities for the period. Securities that have a fixed redemption value and were purchased to match plan obligations or specific portions of obligations may be carried at an amount based on their ultimate redemption value, assuming a constant rate of return until maturity. In cases where it is not possible to calculate the fair value of a pension plan investment, such as full ownership of a business, the reasons why fair value is not used are disclosed in the financial statements. For investments that are carried at a value other than market or fair value, fair value is typically also disclosed. Assets used in the operating activities of the fund are accounted for in the manner set out in the relevant standards.

Information disclosure

34 The financial statements of a defined benefit or defined contribution plan also contain the following information:

• (a) a statement of changes in the net assets of the pension plan that serve as the source of benefits;
• (b) a summary of the main principles accounting policy; And
• (c) a description of the plan and the effect of any changes to the plan during the period.

35 Financial statements provided by pension plans include the following information (where applicable):

• (a) a statement of the plan's net assets serving as the source of benefits, disclosing the following information:
  • (i) assets at the end of the period, classified as appropriate;
  • (ii) asset valuation method;
  • (iii) information about each individual investment that exceeds either 5% of the plan's net assets serving as a source of benefits or 5% of the total value of securities of any class or type;
  • (iv) details of each investment in the employer; And
  • (v) liabilities other than the actuarial present value of pension benefits due;
• (b) a statement of changes in the net assets of the benefit plan, providing the following information:
  • (i) employer contributions;
  • (ii) employee contributions;
  • (iii) investment income, such as interest and dividends;
  • (iv) other income;
  • (v) benefits paid or payable (presented by category, for example: old age pensions, death benefits, disability benefits, and lump sum payments);
  • (vi) administrative expenses;
  • (vii) other expenses;
  • (viii) income taxes;
  • (ix) gains and losses on disposal of investments and changes in the value of investments; And
  • (x) transfers from and to other plans; (c) a description of the pension fund's funding policy;
• (d) for defined benefit plans, the actuarial present value of the benefit payments due (which may be divided into unconditional and non-conditional benefits) based on the benefits due under the terms of the plan, the value of services provided to date and the use of either current levels wages or projected levels; this information may be included in an accompanying actuary's report intended to be read in conjunction with the related financial statements; And
• (e) for defined benefit plans, a description of the significant actuarial assumptions made and the method used to calculate the actuarial present value of the pension benefits due.

36 A pension plan report contains a description of the plan, either as part of the financial statements or as a separate report. It may include the following information:

• (a) the names of the employers and groups of workers covered by the plan;
• (b) the number of participants receiving payments and the number of other participants classified as such;
• (c) the type of plan - defined contribution plan or defined benefit plan;
• (d) a note indicating whether plan participants make contributions;
• (e) a description of pension benefits due to participants;
• (f) a description of each of the participant's withdrawal conditions; And
• (g) changes in items (a) to (f) during the period covered by the report.

Effective date

37 This Standard shall apply to the financial statements of pension plans that
covering periods beginning on or after 1 January 1988.

IFRS No. 26 “Accounting and reporting for pension programs (pension plans)” used for reporting on pension plans.

pension plan- These are agreements under which a company provides pensions to its employees at or after the end of their service, and the pensions can be calculated even before retirement.

Types of pension plans:

1) with defined contributions;

2) with defined benefits.

IFRS No. 26 “Accounting and reporting for pension schemes (pension plans)” applies and to retirement plans sponsored by sponsors who are not employers. Pension plans are based on formally concluded agreements, some of which are informal. There are pension plans that allow employers to limit their liability under the plans. Such employers cannot cancel the pension plan if they want to retain employees.

Pension plan investments are accounted for at fair value. For marketable securities, their market value is taken as fair value. Securities that have a fixed value may be carried at a value that is based on their ultimate redemption value, assuming a constant yield until maturity. If it is not possible to obtain fair value for a pension plan investment in the financial statements, the reasons why fair value is not used must be disclosed.

Pension plan reporting must disclose the following information: reporting changes in net assets of the pension plan; employer contributions; employee contributions; investment (interest, dividends) income; other income; pensions; income taxes; administrative and other expenses; P & L; reporting of net assets; classification of assets at the end of the reporting period; asset valuation methods; information about the investment in the employer; statement of elements of accounting policies; a description of the plan and the results of changes to the plan during the reporting period.

Pension plan reporting must contain a description of the plan, which should include the following information:

1) the name of the employers and groups of employees covered by the plan;

2) the number of participants who will receive pensions;

3) type of plan (defined contribution or benefit);

4) description of pensions;

5) a description of the conditions for termination of the plan;

6) an explanation of whether contributions are made by plan participants;

7) changes in the conditions for termination of the plan during the reporting period.

IFRS 26
Applicable to company pension plans
where such reports are prepared.
Treats the pension plan as a separate
reporting organization.
For pension plans apply
provisions of all other IFRSs, except
the prevailing meaning of IFRS 26.
Regulates the generation of reporting,
considering all participants as
groups.

2

IFRS 26
IFRS 26 does not apply:
Compensation for layoffs.
Deferred compensation payments.
Long service awards.
Staff reductions.
Health plans and
social security.
Bonus plans.
State pensions.
IAS 26. Accounting and reporting for pension plans (programs).
3

IFRS 26
There are two types of pension plans:

the amount of contributions.
Pension plans with defined
size of payments.
Hybrid plans are considered plans with
established amount of payments.
IAS 26. Accounting and reporting for pension plans (programs).
4

DEFINED CONTRIBUTION PLANS
Reporting should reflect:
the amount of net assets intended for payment
benefits;
description of the funding policy.
Purpose of reporting:
periodic submission of information about
efficiency of the corresponding investments.
Reporting should include:
description of the main activities,
reporting on operations and investment performance,
description of the main directions of investment policy.
IAS 26. Accounting and reporting for pension plans (programs).
5

The company promises a pension in the future.
The amount of required contributions assumes
engaging an actuary.
To calculate liabilities it is necessary to determine:
– future length of service of the employee,
– retirement age,
– the amount of the last salary,
– survival rate,
– return on investments of the pension plan.
IAS 26. Accounting and reporting for pension plans (programs).
6

DEFINED BENEFITS PLANS
The reporting must contain a report that reflects:
net assets for benefit payments;
actuarial present value of promised pensions with
breakdown into unconditional and conditional rewards;
deficit or surplus under the program, or
indicators of net assets for pension payments, including:
– notes on actuarial present value
promised pensions, broken down into unconditional and
contingent rewards; or
– a link to such information in the attached report
actuary.
IAS 26. Accounting and reporting for pension plans (programs).
7

ACTUARIAL PRESENT VALUE
PROMISED PENSIONS
Can be calculated based on:
from the current salary level,
projected salary level
at the time of participants' retirement.
IAS 26. Accounting and reporting for pension plans (programs).
8

ASSESSMENT OF PLAN ASSET VALUE
Pension plan investments should
accounted for at fair value.
If it is impossible to estimate fair
cost should be disclosed reasons why
for which fair value accounting is not
is underway.
IAS 26. Accounting and reporting for pension plans (programs).
9

10.

INFORMATION DISCLOSURE
Pension plan reporting must
contain the following information:
statement of changes in net assets,
benefits available for payment;
summary of the main provisions
accounting policy;
description of the program, as well as consequences
any changes to the program during the reporting period
period.
IAS 26. Accounting and reporting for pension plans (programs).
10

11.

INFORMATION DISCLOSURE
Reporting on pension plans if necessary
contains:
Statement of net assets for benefit payments with disclosure:
– information about assets at the end of the reporting period;
– method for determining the value of assets;
– information on individual investments exceeding either
5% of net assets intended for payment of benefits,
or 5% of the value of securities of any class or
type;
– information about any investments in the company
employer;
– other liabilities (besides the actuarial reduction)
the cost of promised pensions).
IAS 26. Accounting and reporting for pension plans (programs).
11

12.

INFORMATION DISCLOSURE
certificate indicating changes in net assets for payment
benefits containing:
– contributions from the employer and employees;
– income from investments;
- Other income;
– benefits paid or to be paid;
– administrative and other expenses;
– income taxes;
– profit and loss from disposal of investments;
– transfer of funds between programs.
IAS 26. Accounting and reporting for pension plans (programs).

IAS 26 used for reporting on pension plans in companies that prepare this type of reporting. IAS 19 Employee Benefits addresses the determination of pension costs in the financial statements of employers with plans, so IAS 26 complements IAS 19.

Funding is a transfer of assets to another enterprise (fund), independent of the employer’s enterprise, to cover future pension obligations.

Participants - these are members of the pension plan, as well as other persons entitled to receive payments under this plan.

The net assets of the pension plan serving as the source of benefits are are pension plan assets minus liabilities other than the actuarial present value of pension benefits due.

Actuarial present value of pension benefits due is the present value of expected pension plan benefits due to retired and active employees based on the services they have already provided.

Unconditional payments – these are payments the right to receive under the terms of the pension plan does not depend on the continuation of the employment relationship.

Some pension plans have non-employer sponsors. IAS 26 also applies to the financial statements of such plans.

Most pension plans are based on formally negotiated agreements. Some plans are informal in nature but acquire some degree of commitment as a result of employers' work practices. Although some pension plans allow employers to limit the plan's liability, canceling a pension plan is generally difficult because... employers want to retain employees. Informal pension plans are subject to the same accounting and reporting methods as formal plans.

Many pension plans provide separate funds into which contributions are made and from which payments are made. Such funds may be managed by persons who independently manage the assets of the funds. In some countries these persons are called trustees. The term “trustee” is used in IAS 26 to apply to such persons, regardless of whether a formal trust has been created.

The financial statements of a defined benefit or defined contribution plan contain the following information:

a) a report on changes in the net assets of the pension plan that serve as the source of payments;

b) a summary of the significant accounting policies and

c) a description of the plan and the effect of any changes to the plan during the period.

Financial statements provided by pension plans include the following information (where applicable):

a) a statement of the net assets of the pension plan serving as the source of payments, disclosing the following information:

1) assets as of the end of the period, classified accordingly;

2) method of asset valuation;

3) information about each individual investment exceeding either 5% of the net assets of the pension plan serving as the source of payments, or 5% of the total value of securities of any class or type;

4) information about each investment in the employer and

5) liabilities other than the actuarial present value of pension benefits due;

b) a report on changes in the net assets of the pension plan serving as the source of payments, providing the following information:

1) employer contributions;

2) employee contributions;

3) investment income, such as interest and dividends;

4) other income;

5) benefits paid or payable (presented by category, for example: old age pensions, benefits in case of death, disability, and lump sum payments);

6) administrative expenses;

7) other expenses;

8) income taxes;

9) profits and losses from the sale of investments and changes in the value of investments and

10) transfers from and to other plans;

c) description of the pension fund’s funding policy;

d) for defined benefit plans, the actuarial present value of the pension benefits due (which may be divided into unconditional and non-conditional benefits), based on the benefits due under the terms of the plan, the value of services provided to date and the use of either current salary levels fees, or projected levels; this information may be included in the accompanying actuary's report, which is intended to be read in conjunction with the related financial statements and

e) for defined benefit plans, a description of the significant actuarial assumptions made and the method used to calculate the actuarial present value of the pension benefits due.

A pension plan report contains a description of the plan, either as part of the financial statements or as a separate report. It may include the following information:

a) the names of the employers and groups of employees covered by the plan;

b) the number of participants receiving payments and the number of other participants classified accordingly;

c) type of plan – defined contribution plan or defined benefit plan;

d) a note indicating whether plan participants make contributions;

e) description of pension benefits due to participants;

f) a description of each of the conditions for the participant's withdrawal from the plan; And

g) changes during the period covered by the report.

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IAS 26 Pension benefit plans

(pension plans)"

www . *****/technology/vestnik/uchebnye-posobiya-po-msfo

2011 G.

EDUCATIONAL BENEFITS BY IFRS

(million copies downloaded)

Here is a tutorial on IFRS. This latest version legendary training manuals in Russian and English, prepared within the framework of three TACIS projects, which were carried out by a consortium led by Audit with financial support from the European Union. These manuals have also been posted on the Ministry of Finance website Russian Federation.

These tutorials cover various accounting concepts based on IFRS. This series is intended as a practical guide for professional accountants who wish to independently obtain additional knowledge, information and skills.

Each collection is an independent short course, designed for no more than three hours of lessons. Although these tutorials are part of a series, each is a stand-alone course, independent of the others. Each study guide includes information, examples, self-test questions, and answers. Users are expected to have basic knowledge of accounting; If a tutorial requires additional knowledge, this is noted at the beginning of the section.

We plan to finalize the first three editions of the manuals and make them available for free access. Please tell your friends and colleagues about this. For the first three editions and the updated texts, the copyright in each collection is held by the European Union, whose policy is to permit free use of the material for non-commercial purposes. We own the copyright and are responsible for later editions and revisions. Our copyright policy is the same as that of the European Union.

We would like to express special gratitude Elizabeth Apraksin (European Union), curator of the above-mentioned TACIS projects , Richard J. Gregson(Partner, PricewaterhouseCoopers), Project Director, and to all our friends fromBanker. Ru, for posting these tutorials.

TACIS project partners: Rosexpertiza(Russia), ACCA(Great Britain), Agriconsulting(Italy), FBK(Russia), and European Savings Bank Group(Brussels).

We express our sincere gratitude for your help Smith(editor of the third issue) and To Allan Gamborg - project managers and Ekaterina Nekrasova, Director of PricewaterhouseCoopers, who supervised the preparation of the Russian version (years) . The idea of ​​publication belongs to Phillips, the manager of the first two projects, who wrote the tutorials and edited the first two versions. We are proud to be involved in the implementation of this idea.

Robin Joyce

Professor of the Department of International Monetary, Credit and Financial Relations

Financial University under the Government of the Russian Federation

Honorary Professor of the Siberian Academy of Finance and Banking

Russia, Moscow, 2011 (updated edition)

1. Pension benefit programs (pension plans) - Introduction 3

2. Definitions 4

3. Programs (plans) with defined contributions 5

4. Programs (plans) with defined benefits 6

5. All programs (plans) 8

6. Disclosure 9

7. Questions for self-control (multiple choice) 13

8. Answers to questions 14

1. Pension benefit programs (pension plans) - Introduction

REVIEW

Task

The purpose of this training manual is to help professionals understand the requirements of IAS 26 Pension Benefit Plans.

IAS 26 is light in scope because much of the work associated with pension benefit plans is carried out by actuaries rather than accountants.

Scope of application

IAS 26 should be applied to the reporting of pension benefit plans in those entities where they are reported.

Pension benefit schemes may be called by different names, such as 'pension schemes' or 'pension benefit schemes'. IAS 26 treats a pension benefit plan as a separate reporting entity, independent of the entity where the plan participants work.

For pension benefit plans, the provisions of all other IFRSs apply, except where the provisions of IAS 26 prevail.

IAS 26 regulates the reporting of the program, considering all participants as a group. Its provisions do not apply to reporting for individual plan participants reflecting their rights to pension benefits.

IAS 19 Employee Benefits sets out how the value of pension benefits is calculated for employers' financial statements. IAS 26 complements IAS 19.

Pension benefit programs can be implemented in two versions - with the establishment of the amount of contributions or with the establishment of the amount of pension payments. Some programs have characteristics of both. For the purposes of IAS 26, such “hybrid” plans are treated as defined benefit plans.

Special programs for early retirement or staff reduction (severance pay);

Health or welfare programs;

Programs that provide for the payment of bonuses.

The requirements of IAS 26 also do not apply to state pensions.

2. Definitions

Pension benefit programs are contracts under which a company provides post-employment benefits to its employees (in the form of an annual income or lump sum payment), where such payments or employer contributions can be determined (or estimated) in advance of the employee's retirement, based on conditions established by the contract or from established practice in the company.

Defined contribution programs (plans)- these are pension programs (plans) in which pension payments are determined based on the size of the company’s contributions to the fund and the corresponding investment income.

Defined benefit programs (plans) – These are pension programs (plans) in which the amount of pension payments is set on the basis of a formula, the usual parameters of which are employee wages and/or length of service in the company.

Financing is a transfer of assets to someone independent from the employer legal entity(fund) to meet future pension obligations.

Participants – these are persons who are entitled to receive pension benefits under this program.

Net assets available to pay benefits - These are plan assets less liabilities other than the actuarial present value of promised benefits.

Actuarial present value of promised benefits is the present value of expected benefits from a pension plan to current and former employees for services they have already provided.

Secured Rewards– these are remunerations, the rights to which are not conditional on continued work in the company.

EXAMPLES– secured and unsecured pension benefits

1. You have worked for your company for 5 years and will work for another 10 years and then retire. Even if you quit today, you will receive a pension based on 5 years of work experience in this company.

The pension, associated with 5 years of service in the company, is a secured remuneration. The pension associated with the remaining 10 years is not vested as it will only be paid if you continue to work for the firm until you retire.

2. Your pension plan provides benefits only to those employees who will continue to work for the company until they retire. Only those who have already become pensioners and are receiving a pension are entitled to a secured pension benefit. Future pensions related to current employees are not vested because they provide for continued employment with the company.

Some pension plans are funded by sources other than the employer; The provisions of IAS 26 also govern the accounting for such programs.

Some trade unions pay pensions to their members. The provisions of IAS 26 are applicable to such schemes.

The basis for most pension plans is formal agreements. Some programs (plans) do not require formal registration, but create obligations arising from the established practice of the employer.

EXAMPLE– Unofficially registered programs

Your employer pays pension benefits based on your salary and length of service with the company. Although the agreement has not been formalized, employees expect to receive such pension benefits upon retirement. The employer assumes appropriate obligations, since non-payment of pensions will create problems both with current employees and with those who worked for the company in the past.

Under the terms of some programs, employers may limit their obligations to the program, but it is generally difficult for an employer to eliminate a program altogether if it intends to retain employees. For an unregistered program, the same accounting procedures apply as for an officially registered one.

Some pension programs (plans) provide for the transfer of funds to a special fund, which, in turn, pays pension benefits. These funds may be managed by parties who independently manage the fund's assets. In some countries, these parties are called trustees (trustees). The concept of fiduciaries is used in IAS 26 to refer to such parties, regardless of whether a trust is formed.

EXAMPLE– Separate, independently managed funds

Your company has formed several pension funds for managers at various levels. These funds are managed by a commercial bank. The funds concentrate only pension funds.

3. Programs (plans) with defined contributions

Reporting for defined contribution plans must reflect:

The amount of net assets intended for payment of benefits;

Description of funding policy.

EXAMPLE- defined contribution plan

Your pension fund operates a defined contribution plan. Your company contributes 10% of your salary to the fund, and you contribute 5% of your salary. (This is a defined contribution plan.) These amounts are deposited on your behalf and form the pension that you will receive after finishing your working career.

The company has no other obligations. Regardless of the return on investment, the company does not pay any additional funds.

The employer's obligations are usually satisfied by transferring funds to the fund. An actuarial consultation is not usually required unless it is necessary to estimate pension benefits based on today's contribution levels, changes in future contribution levels and investment returns.

Activities under the program are of particular interest to its participants, since they directly affect the level of their future pensions.

Participants want to know whether the fund has received their contributions and whether proper controls are in place to protect the rights of benefit recipients.

In turn, the employer is interested in effective and conscientious activities within the framework of the program. The employer prefers to have low fund management costs. High rates of payments from the funds motivate staff and soften demands for increasing contributions to the pension fund.

EXAMPLE– employer interest

The firm contributes 10% of its labor costs to its own fund, the management costs of which amount to an additional 4% of the wage fund. The fund's poor performance led to a significant reduction in pensions. As a staff survey showed, this level of pensions is of no value to workers. The company contributes agreed amounts to the fund, and there are virtually no pension payments.

The purpose of reporting under a defined contribution plan is to provide periodic information on the performance of related investments. Such reporting should include:

(i) description of the main activities for reporting period and the consequences of any changes related to the program and the conditions of participation in the program;

(ii) reporting of operations and information on the performance of investments during the reporting period, as well as the financial position of the program at the end of the reporting period;

(iii) description of the main directions of investment policy.

4. Defined benefit programs (plans)

A defined benefit plan is more complex than a defined contribution plan. In accordance with the terms of such a program, the participant is promised a specific pension amount based on the length of service in the company and the salary received (for the last year or on average for the last 3 years).

EXAMPLE - defined benefit plan

Your company offers a pension, the amount of which is determined based on the salary for the last year of your work in the company. Each year you work for the firm entitles you to an additional pension increase equal to 1/60 of your final salary.

Your last salary was $12,000. You have worked for the company for 40 years.

The annual pension payment will be $8/60 * $12,000).

The company promises a pension in the future. The amount of required contributions to the fund is determined on the basis of extremely complex calculations that involve the involvement of a specialist (an actuary) who makes recommendations on the amount of contributions.

In order to calculate obligations to a future pensioner, it is necessary to determine:

The length of service during which each team member will work in the company;

Retirement age;

Last salary amount;

Life expectancy of a pensioner after retirement (survival rate).

If the spouse will receive a pension after the death of the pensioner, additional calculations must be made.

In order to calculate the amount of contributions, it is necessary to determine assumptions about the return on investment of the pension fund.

Based on these estimates, the actuary calculates whether the amount of contributions to the fund will be sufficient to pay the promised pension or whether the amount of contributions will need to be increased if the fund is in deficit (and possibly reduced if the fund has a surplus). An example of such assumptions is given at the end of this manual (see Extract from the financial statements - Note 2).

Defined benefit plan reporting must include:

(1) a report that reflects:

(i) net assets available to pay benefits;

(ii) the actuarial present value of promised benefits, broken down into unconditional and contingent benefits;

(iii) program deficits or surpluses; or

(2) a statement showing the net assets available to pay pensions, including:

(i) notes disclosing the actuarial present value of promised benefits, broken down into unconditional and contingent benefits, or

If an actuarial valuation has not been made at the reporting date, the most recent valuation available should be used as a basis and the date of that valuation should be disclosed.

The actuarial present value of promised benefits should be determined based on the value of services received by the company by the reporting date based on:

Current salary level; or

Projected salary level with disclosure of information about the valuation method used.

The effect of any changes in actuarial assumptions that have a material effect on the actuarial present value should also be disclosed.

EXAMPLE - changes to actuarial assumptions

Your actuary tells you that past pension calculations were based on recent employee turnover rates. They have been very high in recent years due to a large-scale reorganization of the group. The most recent figures are based on the assumption that workers will work longer hours, which will generate larger pensions.

Such changes in assumptions must be disclosed.

The reporting should explain the relationship between the actuarial present value of the promised benefits and the amount of net assets available to pay the benefits, as well as the funding policy for the promised benefits.

Under the terms of defined benefit plans, future benefits depend on:

Financial status of the program;

(ix) gains and losses on disposals of investments or changes in the value of investments;

(x) transfer of funds between programs;

EXAMPLE - transfer of funds between programs

During the reporting period, 110 employees left the company. Their $20 million in pension benefits were transferred to their new employers' funds. In addition, 300 new employees joined the pension plan, contributing $55 million in pension benefits to your fund.

(3) description of funding policy;

(4) for defined benefit plans, the actuarial present value of the promised benefits (broken down into unconditional and contingent benefits) is determined based on the benefits promised under the terms of the plan, the length of service to date with the company, and the current or projected level wages; such information may be included in the accompanying actuary's report, which should be read in conjunction with the relevant financial information;

(5) for defined benefit plans, a description of the significant actuarial assumptions and the method used to calculate the actuarial present value of the promised benefits.

Retirement plan reporting, whether describing the plan as part of the financial information or in the form of a separate report, may include the following:

(i) the name of the employer and the groups of workers involved;

(ii) the number of participants receiving remuneration and the number of other participants properly classified;

EXAMPLE – participants

In accordance with program 563 former employees your company will receive a pension, and 4,693 current employees will receive post-employment pension benefits.

(iii) type of plan - defined benefit or defined contribution;

(iv) notes indicating whether participants are making contributions under the program;

(v) a description of the benefits promised to participants;

EXAMPLE- description of pensions promised to participants

“In accordance with the program, participants are offered a pension supplement in the amount of 1/60 of their last salary for each year of work in the company.”

(vi) a description of the conditions for termination of the program;

EXAMPLE- description of the conditions for termination of the program

“The program is being closed. New members are not allowed. The program is expected to close in 2025, after which all remaining funds will be returned to the company.”

(vii) changes in reporting items (i) - (vi) for the reporting period.

Extract from financial statements - Note 1

Costs of paying pensions

In the ordinary course of business, the Group makes contributions to the Russian Federation Pension Fund on behalf of its employees. Mandatory contributions in accordance with state program Pension benefits are expensed when incurred.

Pensions and other benefits periodically paid upon termination of employment with the company are included in labor costs in the statements of operations, but are not separately disclosed because these costs are not material.

Extract from financial statements - Note 2

Pension obligations

The Group companies sell various programs pension provision. Typically, programs are funded by contributions to insurance companies or trustee-managed funds, and the amount of contributions is determined based on periodic actuarial calculations. The Group implements programs with both defined benefits and defined contributions. A defined benefit plan is a retirement plan that determines the amount of retirement benefit a worker will receive upon retirement, usually based on one or more factors such as age, length of service with the company, and salary level.

A defined contribution plan is a pension plan under which the Group pays fixed contributions to an independent entity. The Group does not undertake any legal or customary obligations to additional contributions in the event that the fund does not have sufficient funds to pay benefits to all employees based on their length of service for the current and previous periods.

Liabilities recognized in the balance sheet for defined benefit plans are stated at the present value of the benefit obligation at the reporting date, less the fair value of plan assets and any adjustments for unrecognized actuarial gain or loss and past service cost.

Defined benefit obligations are calculated annually by independent actuaries using the projected unit credit method. The present value of defined benefit obligations is determined by discounting estimated future cash flows. The discount rate used is interest rates on safe corporate bonds denominated in the same currency in which the benefits will be paid and maturing close to the respective benefit obligations.

Actuarial gains and losses resulting from adjustments in light of experience and changes in actuarial assumptions are recognized as expenses or income over the average period until the retirement of current employees.

Past service cost is recognized immediately in the income statement unless changes to the benefit plan are conditional on the employee's continued employment with the company for a specified period (mandatory period).

In this case, past service cost is amortized on a straight-line basis over the statutory period.

Under defined contribution plans, the Group transfers funds to a public or private pension insurance fund on a mandatory, contractual or voluntary basis. Apart from payment of contributions, the Group does not have any additional obligations. Contributions are recognized as pension expense for employees when they become due. Prepaid contributions are recognized as an asset depending on whether the overpayment is expected to be refunded or a reduction in future payments.

Pension obligations

Liabilities in balance sheet
Pension benefits
Expenses in the income statement
Pension benefits
Benefits for medical service after finishing work in the company

Pension benefits

The amounts recognized in the balance sheet are determined as follows:

Present value of financed liabilities
Fair value of plan assets
Present value unpaid obligations
Unrecognized actuarial losses
Unrecognized past service cost
Liability on the balance sheet

The assets of the pension plan include ordinary shares, the fair value of which is 136 (2003: 126), as well as a building occupied by the Group, the fair value of which is 612 (2003: 609). Reporting Standards – Illustrative Corporate Consolidated Financial Statements

(All amounts in euro thousands unless otherwise stated)

The amounts recognized in the income statement are as follows:

Cost of current services (costs associated with work performed during the reporting period)
Interest expenses
Net actuarial losses recognized during the year
Past service cost (costs associated with work performed in past periods)
Loss reduction
Total (to be included in labor costs)

Of the total expenses, 521 (in 2003, 241 (in 2003) were included in the items “cost of goods sold” and “administrative expenses”, respectively.

The actual income from program assets was 495 (in 2003

The changes in liabilities recognized in the balance sheet are as follows:

For the beginning of the year
Exchange differences
Liabilities acquired as a result of a business combination
Total expenses reported in the income statement
Paid fees
At the end of the year

The main actuarial assumptions are given below:

Discount rate
Expected income from program assets
Future salary increases
Future increase in pensions

7. Questions for self-control (multiple choice)

1. Scope of IFRS ( IAS) 26 covers:

(i) pension plans with assets invested in insurance companies;

(ii) compensation in connection with dismissal;

(iii) deferred compensation;

(iv) long service awards;

(v) special early retirement or downsizing programs;

(vi) health or welfare programs;

(vii) programs providing for the payment of premiums (bonuses);

(viii) state pension provision.

2. The “actuarial present value of promised benefits” is related to:

1. already accumulated work experience in this company;

2. length of service in this company until reaching retirement age;

3. total length of service in this company.

3. Scope of IFRS (IAS) 26 covers:

1. pension programs financed not only by employers, but also from other sources;

2. not officially registered pension programs;

3. pension funds managed by independent parties.

1. None of the above options

4. “The amount of future pension benefits for a participant is determined by the amount of contributions paid by the employer, the participant or both, as well as the performance of the fund and the return on its investments.” It refers to:

3. “hybrid” programs.

5. “The participant is promised a specific pension amount, determined based on the time spent working in the company and the salary received (in the last year or on average over the last 3 years).” It refers to:

1. defined benefit programs;

2. defined contribution programs;

3. “hybrid” programs.

6. Unconditional rewards are benefits:

1. already received by pensioners;

2. the rights to which are determined by the condition of continued work in the company;

3. rights to which are not determined by the condition of continued work in the company.

7. The present value of expected benefits under the pension plan should be calculated and reported based on:

1. current salary level;

2. the projected level of wages by the time participants retire;

3. both options: 1 and 2.

4. or 1, or 2.

8. Under the terms of a defined benefit plan, the amount of promised benefits depends on:

1. financial situation of the program;

2. the ability of contributors to make contributions under the program in the future;

4. the effectiveness of the program’s operational activities;

5. age of program participants;

1. None of the above options

9. Investments within the pension plan must:

1. reflected at net present value;

2. accounted for at fair value;

3. accounted for at cost.

10. Any one direction of investment exceeding 5% of net assets intended for the payment of pension benefits, or 5% of any class or type of securities:

1. not disclosed in the reporting;

2. information about him is disclosed;

3. is reflected in equity as a separate component.

8. Answers to questions

Question	Answer

Note: in this textbook The following publications from PricewaterhouseCoopers were used:

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