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19
ACCOUNTING AND REPORTING BY
RETIREMENT BENEFIT PLANS (lAS 26)
1. INTRODUCTION
1.1 lAS 26 deals with accounting and reporting to all part icipants of a retirement benefit plan as a
group, and not with reports that might be made to individuals about their particular retirement
benefits. The Standard sets out the form and content of the general-purpose financial reports of re–
tirement benefit plans. The Standard applies to
• Defined contribution plans. Where benefits are determined by contributions to the plan to–
gether with inve stment earnings thereon.
• Defined benefit plans. Where benefits are determined by a formula based on employees'
earnings and/or years of service.
1.2 lAS 26 is sometimes confused with lAS 19, because both Standards address employee bene–
fits. But there is a difference: while lAS 26 addresses the financial reporting considerations for the
benefit plan itself, as the reporting entity, lAS 19 deals with employers' accounting for the cost of
such benefits as they are earned by the employees. These Standards are thus somewhat related, but
there will not be any direct interrelationship between amounts reported in benefit plan financial
statements and amounts reported under lAS 19 by employers.
2. SCOPE
2.1 lAS 26 addresses the accounting and reporting by retirement benefit plans . It does not man–
date the presentation of an annual report for the plan . However, the terms of a retirement plan may
require that the plan present an annual report; in some jurisdictions this may be a statutory re–
quirement.
If
such annual reports are prepared by a retirement plan, then the requirements of this
Standard should be applied to them .
2.2 The retirement benefit plan is a separate entity, distinct from the employer of the plan 's par–
ticipants; the Standard treats it as such. The Standard also applies to retirement benefit plans that
have sponsors other than employer (e.g., trade associations or groups of employers). Furthermore,
this Standard deals with accounting and reporting by retirement benefit plans to all participants as a
group; it does not deal with reports to indiv idual participants with respect to their retirement benefit
entitlements.
2.3 Whether there are formal retirement benefit plans or informal retirement benefit arrange–
ments, the Standard prescribes the same accounting for both. It is also worthy of mention that this
Standard applies whether a separate fund is created or not and regardless of whether there are trus–
tees . The requirements of this Standard also apply to retirement benefit plans with assets invested
with an insurance company, unless the contract with the insurance company is in the name of a
specified participant or a group of participants and the responsibility is solely of the insurance
company.
3. DEFINITIONS OF KEY TERMS (in accordance with lAS 26)
Actuarial present value of promised retirement benefits. The present value of the expected
future payments by a retirement benefit plan to existing and past employees, attributable to the
service already rendered.
Defined benefit plans. Retirement benefit plans whereby retirement benefits to be paid to
plan participants are determined by reference to a formula usually based on employees' earn–
ings and/or years of serv ice.