Classification of a post-employment benefit

Keywords: Mazars, Thailand, IFRS, IFRS IC, IFRIC

28 August 2019

• the entity has an obligation to pay fixed annual contributions to the plan, relieving it of any legal or constructive obligation to pay further contributions if the plan does not hold sufficient assets;
• the entity is entitled to a potential discount on its annual contributions if the ratio of plan assets to plan liabilities exceeds a set level.

The request asked whether the existence of a right to a potential discount would result in classification as a defined contribution plan, or as a defined benefit plan.

In an agenda decision appearing in the June 2019 IFRIC Update, the Committee concluded that the existence of a right to a potential discount would not in itself result in classifying a post-employment benefit plan as a defined benefit plan.

Considering the classification of post-employment benefits more generally, the Committee reiterated:

• the importance of assessing all relevant terms and conditions of a plan, as well as any informal practices that might give rise to a constructive obligation; and
• that an entity should disclose the judgments that its management has made regarding the classification of post-employment benefit plans.