Retirement Benefit Plans

IPSASB proposes accounting requirements for retirement benefit plans

In New Zealand, Standards for Tier 1 and Tier 2 public benefit entities (PBEs) are primarily based on standards issued by the International Public Sector Accounting Standards Board (IPSASB). The IPSASB has published for comment Exposure Draft 82, Retirement Benefit Plans (the ED).

The ED proposes accounting requirements for the financial statements of retirement benefit plans in the public sector. Retirement benefit plans are sometimes referred to by various names, such as ‘pension schemes’ or ‘superannuation schemes’.

We think this ED is unlikely to be relevant in New Zealand, because we understand that:

  • New Zealand retirement benefit plans are generally classified as for-profit entities – not as PBEs – for the purpose of preparing their financial statements.
  • Therefore, New Zealand retirement benefit plans report under NZ IFRS – rather than under PBE Standards.

A PBE entity is an entity whose primary objective is to provide goods or services for community or social benefit and where equity has been provided to support that objective rather than for a financial return.

You may want to provide feedback on this project if:

  • you are aware of New Zealand retirement benefit plans that could be classified as PBEs for financial reporting purposes; or
  • you would like to contribute the IPSASB’s work in this area.

Further information is provided below.

What are retirement benefit plans?

A retirement benefit plan is arrangement where an entity provides benefits to employees after retirement. In many cases, a retirement benefit plan involves the setting up of a separate fund or trust, into which contributions are made and from which retirement benefits are paid.

The IPSASB’s proposals

The IPSASB’s standards currently do not specify the accounting requirements that should be applied by a retirement benefit plan. To close this gap, this ED was issued.

The ED proposes to introduce accounting, presentation and disclosure requirements for retirement benefit plans in the public sector. The proposals aim to enhance transparency of retirement benefit plans in the public sector.

The proposals in this ED are mostly similar to the requirements in NZ IAS 26 Accounting and Reporting by Retirement Benefit Plans – the standard currently applied by New Zealand retirement benefit plans. However, the two main differences are summarised below.

IPSASB ED 82 proposals

NZ IAS 26 (current requirements)

For defined benefit plans, the actuarial present value of promised retirement benefits must be presented on the face of the statement of financial position.

Defined benefit plans have two options for providing information on the actuarial present value of promised retirement benefits:

  • they can present this amount on the face of the statement of net assets available for benefits, or;
  • they can disclose this amount in the notes.

The actuarial present value of promised retirement benefits is calculated using projected salaries – not current salaries.

The actuarial present value of promised retirement benefits is calculated using either current salaries or projected salaries.

The situation in New Zealand

We understand that in New Zealand, retirement benefit plans are generally classified as for-profit entities for financial reporting purposes. We understand that this would be the case even when the retirement benefit plan has been established by a not-for-profit (NFP) or public sector entity.

This means that we understand all New Zealand retirement benefit plans report using NZ IAS 26 Accounting and Reporting by Retirement Benefit Plans and other applicable NZ IFRS Standards.

Therefore, even if we were to issue a PBE Standard based on ED 82, we would expect all retirement benefit plans to continue reporting using NZ IAS 26.

Your feedback is important

We encourage you to read the ED and share your comments with us. Particularly, we want to hear your views on whether you are aware of retirement benefit plans that could be classified as PBEs for financial reporting purposes in New Zealand.

Your comments will help us ensure that PBE Standards provide for appropriate reporting outcomes for public sector and not-for-profit reporting entities in Aotearoa New Zealand.

Consultation Documents

The full Exposure Draft, as well as the “At a Glance” document and an explanatory video can be viewed on the IPSASB’s website here.

How to provide feedback

Please send us your comments—both formal and informal—by 10 June 2022, using the secure upload form below.

All comments received will be considered and will form part of the feedback we share with the IPSASB.

You can also choose to send your comments directly to the IPSASB (due by 1 August 2022) here.

We intend on publishing all comments on the XRB website, unless they may be defamatory. If you have any objection to this, we will not publish them. However, they will remain subject to the Official Information Act 1982 and, therefore, may be released in part or in full. The Privacy Act 1993 also applies.