IAS 19 Employee Benefits

June 2012
IAS 19 Employee benefits

A closer look at the amendments
made by IAS 19R and their
impacts in Switzerland
Audit. Tax. Consulting. Corporate Finance.
Contents
1. Introduction
2. Executive summary
3. The most important changes made by IAS 19R
4. Changes in IAS 19R with a significant impact expected in Switzerland
5. Other changes made by IAS 19R for which less impact is

expected in Switzerland
13
6. Comparison of IAS 19R with IAS 19
15
Appendix I Disclosure requirements
19
Appendix II Comparison of IAS 19R with US GAAP
22
Appendix III Early application IAS 19 Employee Benefits

(as revised in June 2011)
23
Your IFRS contacts
43
1. Introduction
On 16 June 2011, the International

Accounting Standards Board (IASB)
published a revised version of IAS 19
Employee Benefits. The revised IAS 19
(IAS 19R) represents the final output
from the IASBs project to improve the
accounting for post-employment
employee benefits.
International Accounting Standard 19 Employee
Benefits
The objective of IAS 19 is to prescribe the accounting
and disclosure for employee benefits by employers.
The Standard identifies four categories of employee
benefits with distinct requirements for each of:
short-term employee benefits;
post-employment benefits;
other long-term employee benefits; and
termination benefits.
IAS 19 was initially issued in February 1998 and had
already been amended several times before the
publication of the revised Standard in 2011.
Chronology IASB project Post-Employment
Benefits, including Pensions
In July 2006, the IASB added a project on postemployment benefits to its agenda with the goal of
revising a number of aspects of accounting for postemployment benefits. In March 2008, the IASB
published a discussion paper (Preliminary Views on
Amendments to IAS 19 Employee Benefits). The
discussion paper considered several elements of the
accounting model of IAS 19 and contained several
proposals for amendments.
Extensive feedback on the discussion paper led to the

publication of the exposure draft Defined Benefit Plans
(Proposed amendments to IAS 19 Employee Benefits)
on 29 April 2010. Further feedback on the exposure
draft (227 comment letters, including many from
Switzerland) has been considered in finalising the revised
Standard.
In addition to this public consultation, the IASB sought
expert advice from an Employee Benefits Working Group.
Structure
In this brochure the changes made by IAS 19R to the
requirements of IAS 19 are described, starting with a
generic description of the changes in the executive
summary. Furthermore, the most important changes
made by IAS 19R and the potential impact are discussed
in more detail, as well as other changes made by IAS
19R that are expected to have an impact in Switzerland.
Finally, overviews are presented which contain the most
significant differences between IAS 19 and IAS 19R, the
disclosure requirements included in IAS 19R, the most
significant differences between IAS 19R and US GAAP
and an example of an early application of the
requirements of IAS 19R in the financial statements.
As the revisions to IAS 19 mainly relate to the
accounting for pensions and other post-employment
benefits, this brochure focuses on this category of
employee benefits.
You can keep up-to-date on future IFRS and IASB
developments via our IAS Plus Website at
www.iasplus.com. We hope that IAS Plus and this
brochure, as well as other Deloitte publications will
continue to assist you in navigating the ever-changing
IFRS landscape.
IAS 19 Employee benefits A closer look at the amendments made by IAS 19R and their impacts in Switzerland
2. Executive summary
IAS 19R will be applicable for reporting

periods starting on or after 1 January
2013. The most significant changes
required on application of the Standard
are highlighted below.
Full recognition of deficit (surplus) on the
statement of financial position
Under IAS 19, for defined benefit plans some of the
effect of actuarial gains and losses can be excluded from
the net defined benefit liability (asset) by using the
corridor approach, and the effect of unvested past
service costs is recognised over the average vesting
period. IAS 19R requires all such items to be recognised
immediately. Actuarial gains and losses for defined
benefit plans will be recognised in other comprehensive
income (OCI) and past service costs will be recognised in
profit or loss. Therefore, apart from any effect of the
asset ceiling, the net defined benefit liability (asset)
recognised on the statement of financial position will
represent the actual deficit (surplus) in an entitys
defined benefit plan.
Introduction of net interest on the net defined
benefit liability (asset)
Under IAS 19, the finance element of the cost
recognised in profit or loss consists of the interest cost
on the defined benefit obligation (DBO) and the
expected return on plan assets. Under IAS 19R, the
concept of net interest on the net defined benefit
liability (asset) is introduced as the equivalent of the
finance element of the cost under IAS 19. The net
interest on the net defined benefit liability (asset) is
defined as the change of the net defined benefit liability
(asset) during the reporting period that arises from
passage of time and is determined by multiplying the
net defined benefit liability (asset) by the discount rate
(market yields on high quality corporate bonds).
Effectively, this means that the defined benefit
obligation and the plan assets are multiplied by the
same interest rate.
The expected return on plan assets under IAS 19

depends on the actual investment portfolio and is
typically not equal to the discount rate applied for the
determination of scheme liabilities. When the discount
rate is lower than the expected return on the actual
investment portfolio (which is generally the case),
application of IAS 19R will decrease interest income
recognised in profit or loss and reduce net profit or loss.
Under IAS 19R, the difference between the interest
income component of net interest and the actual return
on plan assets is recognised in OCI.
Change in the presentation of the defined
benefit cost
Under IAS 19R, the defined benefit cost comprises
service cost, net interest and remeasurements. Service
cost (current and past service cost (including
curtailments) and gains and losses on settlements) and
net interest are recognised in profit or loss, while
remeasurements (actuarial gains and losses, any changes
in the effect of the asset ceiling and the difference
between the interest income and the actual return) are
recognised in OCI.
Introduction of more extensive disclosure
requirements in the financial statements
IAS 19R introduces more extensive disclosure
requirements relating to the characteristics, risks and
amounts in the financial statements regarding defined
benefit plans, as well as the effect of defined benefit
plans on the amount, timing and uncertainty of the
entitys future cash flows.
3. The most important changes made

by IAS 19R
In this chapter, the changes made by

IAS 19R Employee Benefits as stated
in the executive summary are discussed
in more detail.
The changes discussed in this chapter are:
Full recognition of deficit (surplus) on the statement of
financial position;
Introduction of net interest on the net defined benefit
liability (asset);
Change in the presentation of the defined benefit
cost; and
requirements in the financial statements.
Full recognition of deficit (surplus) on the
statement of financial position
Under IAS 19R, the net defined benefit liability (asset)
recognised on the statement of financial position is equal
to the deficit (surplus) in the defined benefit plan, that is
comprised of the present value of the DBO, the fair value
of plan assets and the possible effect of the asset ceiling.
Under IAS 19, this is not necessarily the case due to the
possibility of deferring actuarial gains and losses using the
corridor approach and the requirement to recognise
unvested past service costs over the average vesting
period rather than immediately in the reporting period in
which these occur. The corridor approach leads to less
volatility in the financial statements, which is the main
reason why this treatment is permitted in IAS 19.
Recognition of actuarial gains and losses

Actuarial gains and losses arise due to differences
between expectations and actual gains and losses and
changes in assumptions during the reporting period.
As actuarial gains and losses can be either positive or
negative and depend on market conditions as well as
entity specific developments, the impact on the net
defined benefit liability (asset) can change from year to
year. In order to decrease volatility in profit or loss,
IAS 19 permits deferred recognition through the
corridor approach.
Under the corridor approach, the cumulative
unrecognised amount at the start of the reporting
period is tested against a certain limit (corridor).
Only the amount exceeding the corridor is recognised
in profit or loss over (at most) the expected average
remaining working lives of the employees participating
in the plan.
IAS 19 also permits immediate recognition of actuarial
gains and losses when they occur either in profit or loss
or in OCI, as a result of which all actuarial gains and
losses are included in the net defined benefit liability
(asset). Under IAS 19R, all actuarial gains and losses shall
be recognised in OCI in the reporting period in which
they occur. Therefore, recognition of actuarial gains and
losses in profit or loss, either on a deferred or immediate
basis, is not be possible under IAS 19R.
The application of IAS 19R will impact the current equity
position and future profit or loss of entities currently
using the corridor approach. Upon adoption of IAS 19R,
all cumulative unrecognised actuarial gains and losses at
the start of the earliest comparative period will be
recognised in retained earnings. If an entity has
unrecognised actuarial losses, application of IAS 19R will
decrease the equity of the entity, leading to possible
knock on effects such as issues with loan covenants or
potential borrowing capacity of the entity. Also, OCI will
become more volatile in future years, as all changes of
market-related assumptions (such as the discount rate)
will be recognised in OCI. The statement of financial
position will however reflect the actual deficit (surplus)
in the defined benefit plan, which increases
comparability between entities.
Example
Assets
Total assets
Balance sheet (in red based on IAS 19R)

1,000 1,000
Equity
Net defined benefit liability
Unfunded status
Unrecognised actuarial losses
1,000 1,000
An example of the impact of the first application of IAS

19R on the statement of financial position is presented
above. Under IAS 19, the entity applies the corridor
method and has recognised a net defined benefit
liability of CU400, which is determined by the unfunded
status of CU700 net of unrecognised actuarial losses of
CU300. Upon recognition of the cumulative
unrecognised actuarial losses in retained earnings
(equity) due to the first application of IAS 19R, the net
defined benefit liability increases by CU300 (to CU700)
and the entitys equity decreases by the same amount
(to CU300).
Deferred recognition of past service cost
Past service costs arise when an entity introduces a
defined benefit plan that attributes benefits to past
service or changes the benefits for past service under an
existing defined benefit plan. Under IAS 19, when the
plan sets vesting requirements, unvested past service
costs are recognised in profit or loss on a straight-line
basis over the average period until the benefits become
vested.
Under IAS 19R, all past service costs are recognised in
profit or loss when they occur. Therefore, no
unrecognised amount will exist relating to (unvested)
past service cost after the adoption of IAS 19R.
Concluding
IAS 19R eliminates deferred recognition of actuarial
gains and losses and unvested past service cost.
Therefore, the net defined benefit liability (asset) in the
statement of financial position represents the deficit
(surplus) in the defined benefit plan (other than the
effect of the asset ceiling). Also, OCI and profit or loss
are more volatile due to immediate recognition of
actuarial gains and losses (for entities applying the
corridor approach) and past service cost (for all entities)
when compared to IAS 19.
Liabilities
600
400
300
700
700
(300)
1,000
700
1,000
Introduction of net interest on the net defined

Under IAS 19, the finance element of the cost of defined
benefit plans recognised in profit or loss consists of the
interest cost on the DBO and the expected return on plan
assets. The discount rate used to determine the interest
cost is based on market yields on high quality corporate
bonds (or on government bonds in countries where there
is no deep market in such bonds), while the expected
return on plan assets is determined based on the
expected rate of returns on investments of plan assets.
The rate of return depends on the actual investment
portfolio and is typically not equal to the discount rate,
except for insured contracts where pooled investments
are in place. In general, the expected return on plan
assets exceeds the discount rate due to investments in
assets with a higher level of risk than high quality
corporate bonds (e.g. equities or property).
IAS 19R introduces the net interest on the net defined
benefit liability (asset), which is recognised in profit or
loss. The net interest on the net defined benefit liability
(asset) is defined as the change of the net defined
benefit liability (asset) during the reporting period that
arises from passage of time and is determined by
multiplying the net defined benefit liability (asset) by the
discount rate (market yields on high quality corporate
bonds), both as determined at the start of the annual
reporting period taking into account actual
contributions and benefits paid during the reporting
period. Effectively, this means that the DBO as well as
the plan assets (subject to the effect of the asset ceiling)
are both multiplied by the same interest rate. Compared
to IAS 19, the fact that the plan assets will be multiplied
by the discount rate rather than the expected rate of
return can have a significant impact on profit or loss.
Example
Discount rate
Expected return
Actual return
4.0%
5.0%
5.0%
Defined benefit obligation

Fair value on plan assets
Net defined benefit liability
1,500
(1,000)
500
IAS 19
Interest cost
Expected return
Financing cost (P&L)
60
(50)
10
IAS 19R
Interest expense
Interest income
Net interest on net defined benefit liability (P&L)
60
(40)
20
Expected return
Actual return
Actuarial gains and losses on plan assets
(50)
(50)
Interest income
Actual return
Return on plan assets excluding interest income (OCI)
(40)
(50)
(10)
In the example above, the discount rate (4.0%) is lower

than the expected return (5.0%). As a result, the net
interest on the net defined benefit liability (asset) based
on IAS 19R (CU20) will exceed the financing cost based
on IAS 19 (CU10). The total pension cost recognised in
profit or loss for the entity will therefore increase by
CU10 when applying IAS 19R, thus reducing net profit
or loss. However, as shown in the example, the
reduction of net profit or loss is offset by an increase of
return on plan assets in OCI.
Although this change gives less room for subjectivity
and will therefore improve comparability, effective asset
management is not reflected in profit or loss, which
might be regarded by some companies as a negative
effect of IAS 19R.
IAS 19
Recognised in period
Operating profit
Service cost
Finance costs
Interest cost
OCI
Defined benefit cost
Expected return on
assets
In addition, while IAS 19 permitted the treatment of

administration costs either as a reduction of expected
return or as part of actuarial assumptions, without
providing further guidance, under IAS 19R only the
(administration) costs relating to managing plan assets
are deducted from the actual return (in OCI) and all
other administration costs should be recognised in profit
or loss as they are incurred.
Change in the presentation of the defined
benefit cost
Under IAS 19, the pension expense recognised in profit
or loss consists of several components, such as current
service cost, interest cost and expected return on plan
assets, as well as (depending on the entitys accounting
policy) the recognition of actuarial gains and losses.
IAS 19 had little guidance on the presentation of these
items within profit or loss and in practice a number of
presentations were used.
IAS 19R is more prescriptive and introduces the term
defined benefit cost. The defined benefit cost
comprises all cost (income) during a reporting period
that lead to the development of the net defined liability
(asset), excluding contributions paid. For those amounts
recognised in profit or loss (service cost and net
interest), IAS 19R does not require a specific
presentation in operating cost or financing cost.
Not recognised in period

Not recognised
within corridor
Actuarial gains or losses

Recognised in
future periods
As shown in the diagram opposite, the defined benefit

cost is disaggregated into the following three
components:
IAS 19R
Service cost is recognised profit or loss and comprises:
Service cost
current service cost
interest on service cost
past service cost
non-routine settlements
Profit and loss

(no line specified)
Net interest cost

interest on net defined
benefit liability (after
asset ceiling)
Profit and loss

(no line specified)
Remeasurement
gains/losses
actual return on assets
change in asset ceiling
OCI
Current service cost.

Past service cost (which includes curtailment gains
and losses).
Defined benefit
cost
Settlement gains and losses.

Net interest on the net defined liability (asset) is
recognised in profit or loss.
Remeasurements of the net defined benefit liability
(asset) is recognised in OCI and comprise:
Actuarial gains and losses on the DBO.
The return on plan assets excluding amounts
included in net interest on the net defined liability
(asset).
Any change in the effect of asset ceiling excluding
amounts included in net interest on the net defined
liability (asset).
IAS 19R does not specify line items in which service cost
and net interest are presented and does not either
specify whether service cost and net interest should be
presented as components of a single line item of income
or expense.
requirements in the financial statements
According to IAS 19R entities should disclose
information that:
explains the characteristics of and risks associated with
its defined benefit plans;
identifies and explains the amounts in its financial
statements arising from its defined benefit plans; and
describes how its defined benefit plans may affect the
amount, timing and uncertainty of the entitys future
cash flows.
These disclosure requirements are more extensive than
the disclosure requirements in IAS 19 and will provide
additional insight into the pension situation at the entity.
Examples of these more extensive disclosure

requirements include:
the disclosure of the nature of the benefits;
a description of the risks to which the employee
benefit plan exposes the entity;
the results of a sensitivity analysis that indicates the
influence of each significant actuarial assumptions on
the outcome of the pension valuation;
a narrative description of funding arrangements;
information about the maturity profile including the
duration of the pension liabilities;
entities that participate in a multi-employer defined
benefit plan should for example disclose:
the extent to which the entity is liable for other
entities obligations;
qualitative information about agreed deficit/surplus
allocation on wind-up or withdrawal.
Based on this information, users of the financial
statements should be provided with additional insight
of the entitys obligations regarding employee benefits.
The additional disclosure requirements may, on the
other hand, lead to higher costs for the entity in
gathering the required information.
Nothing
deferred
4. Changes in IAS 19R with a

significant impact expected in
Switzerland
In this chapter, the changes made by
IAS 19R on defined benefits plans for
which a significant impact is expected in
Switzerland are discussed in more detail.
Figure 1. What is the policy for recognising actuarial gains

and losses?
37%
63%
The objective of this revised standard was to improve

financial reporting of employee benefits by eliminating
some presentation options, thus increasing
comparability and enhancing the disclosures about risks
arising from defined benefit plans. In Switzerland, the
following amendments will have a significant impact on
the financial statements:
elimination of the option to use the corridor
approach;
change in the presentation approach and elimination
of expected return on plan assets;
inclusion of risk sharing elements in the determination
of the defined benefit liability; and
introduction of new disclosures.
Elimination of the option to use the corridor
approach in recognising actuarial gains and
losses
IAS 19 Employee Benefits allows, until end of 2012, a
number of options for the recognition of actuarial gains
and losses. The elimination of the corridor method as
announced in the revised standard will significantly
impact the shareholders equity of Swiss companies.
Our last analysis1 based on the 2011 annual reports
published by 30 public companies found that
19 companies are using the corridor approach.
Corridor approach
Immediate recognition approach OCI (ie. equity)
Immediate recognition approach in income statement (0%)
These 19 companies, about two thirds, will need to

recognise the cumulative unrecognised actuarial
gains/losses in retained earnings upon the first
application of the revised standard. Furthermore, under
IAS 19 revised, all past service costs are recognised in
profit or loss as they occur and are no longer spread
over any vesting period.
The net liability (asset) recognized in the statement of
financial position may significantly increase or decrease
upon adoption of the revised standard. For some
entities, the change to the statement of financial
position may significantly impact the debt equity ratio
which may also have consequences on debt covenant
compliance.
The immediate recognition approach results in greater
volatility in the statement of financial position and in
OCI when compared to the corridor approach. Based on
our estimates1, equity of Swiss companies will be
reduced by 6% on average due to the impact of
unrecognised pension costs which comprises actuarial
losses and past service costs.
1 Deloitte IFRS Survey 2012

Focus on financial
reporting in Switzerland
Figure 2. Elimination of the corridor method and

corresponding decrease on reported equity
16%
42%
The users of the corridor approach are aware that the

impact will be significant and they have already
communicated this information in their financial
statements as at 31 December 2011. Illustrative
examples are Givaudan and Swatch Group, both
applying the corridor method, which provide disclosure
in their paragraph with regard to this revised IFRS in
issue but not yet effective.
42%
< 5%
> 5% and < 10%
> 10%
b) Issued and effective for 2013 and after

Amendments to IAS 19: Employee Benets
These new amendments require the immediate recognition of the actuarial gains and losses arising from dened benets plans in the
statement of other comprehensive income, the recognition of service and nance cost in the income statement, and enhanced disclosures.
These amendments will have a signicant impact on the consolidated nancial statements of the Group by increasing its liabilities for postemployment benets and nancial income (expense), and decreasing its other comprehensive income and decreasing equity.
Givaudan, Annual Report 2011
Swatch Group, Annual Report 2011
Change in the presentation approach and

elimination of expected return on plan assets
The amendment introduce a new approach for
presenting changes in defined benefit obligations and
plans assets in profit or loss and OCI. Entities will need
to segregate changes in the defined benefit obligation
and fair value of plan assets into those associated with:
service costs component;
net interest component; and
This change may also cause an entity to become more

conservative in its investment strategies relating to its
defined benefit plan which could lead to higher costs of
providing the associated benefits.
Unsurprisingly, in the sample of companies surveyed1,
the expected return always exceeded the discount rate.
We estimated that Swiss companies may see their
pension cost increasing by 64% on average versus
the reported 2011 numbers. 4 companies out of the
30 surveyed may see their pension cost more than
double.
remeasurement component.
Note that IAS 19R does not specify how an entity should
present service cost and net interest on the net defined
benefit liability (asset). The entity should determine an
appropriate presentation under IAS 1 Presentation of
Financial Statements. Accordingly, entities have an
accounting policy choice as to whether to present service
cost and net interest separately or as a single net figure.
Entities have also a choice to determine where in profit or
loss an entity should present the net interest component.
Out of the 30 companies surveyed1, only 5 presented an
allocation of the pension costs between salaries and
finance costs.
Another significant change is the removal of the
expected return on plan assets in the calculation of the
pension cost. In many cases, using the discount rate to
calculate the interest income on the plan assets will
reduce net profit, since the interest income will not
reflect the benefit from the expectation of higher
returns on riskier investments.
Figure 3. Estimated increase of the pension cost
14%
43%
43%
< 30%
30% 100%
> 100%
With the rise of pension costs recognised in profit or

loss, IAS 19R will have significant consequences on
Swiss companies operating profitability. Illustrative
examples are Swisscom and Schindler which provide a
disclosure in their paragraph about this revised IFRSs in
issue but not yet effective, with their own estimation of
the impact on their profit or loss.
1 Deloitte IFRS Survey 2012

Focus on financial
reporting in Switzerland
> Amendments to IAS 19 Employee Benefits (effective as from 1 January 2013): As a result of
the amendments to IAS 19, actuarial gains and losses in future must be recorded directly under
other comprehensive income. The previous accounting option to either record them immediately in the income statement or under other comprehensive income or defer recording them
in accordance with the so-called corridor method is eliminated. In addition, in future Management shall no longer estimate the return on the pension funds assets in accordance with anticipated income interest on the basis of the allocation of assets, but the return on the funds
assets may only be recorded to the extent of the discounting rate. In addition, the amended IAS
19 requires more extensive note disclosures. In future, entities must provide disclosures as to
the financing strategy of their pension plans and not only describe but also quantify the financing risks inherent in their pension plans. Amongst other things, a sensitivity analysis is required
showing to what degree pension obligations fluctuate depending on changes in significant
measurement assumptions. In future, the average remaining duration of employment benefit
obligations must also be disclosed. If the amendments had already been adopted in the 2011
consolidated financial statements, it is estimated that the costs of defined-benefit pension
plans in the income statement would increase by CHF 76 million.
Swisscom, Annual Report 2011
The application of the revised standard IAS 19 Employee Benefits will lead
to changes in accounting practices. In particular, actuarial gains and losses
will no longer be treated according to the corridor approach and will, instead,
be recognized immediately in other comprehensive income. In addition,
pension cost will be recalculated. The expected return on plan assets and the
interest on the defined benefit obligation were previously calculated separately. Under the new approach, interest is calculated on a net funding basis.
The Schindler Group intends to early adopt the revised IAS 19 as of January 1,
2012, with related retrospective application in 2011. Based on current
knowledge, the financial impacts of its application in 2011 are expected to
be approximately as follows:
Net profit: reduction of CHF 10 million
Equity: reduction of CHF 250 million as of December 31, 2011
Schindler, Annual Report 2011
10
Inclusion of risk sharing elements in the

determination of the defined benefit liability
Risks relating to pensions are typically shared between
the employer (i.e. plan sponsor) and the (former)
employees (i.e. plan participants) in certain jurisdictions.
IAS 19 does not take this risk sharing into account
properly. IAS 19R acknowledges that part of the pension
related risks are shared between the employer and the
plan participants. An important aspect of risk sharing for
the pension situation includes employee contributions,
which is discussed in more detail below.
It is not uncommon that employees contribute to the
pension accrual in their pension plans, usually by
contributing a percentage of their pensionable salary.
Under IAS 19 the expected future employee contributions
are not taken into account in the determination of the
present value of the defined benefit obligation. IAS 19R
clarifies that an entity should take mandatory employee
contributions into account in the valuation of the present
value of the defined benefit obligation. These
contributions are regarded as a negative benefit. The net
benefit (the total benefit excluding future employee
contributions) should therefore be attributed over the
service period under the projected unit credit method.
The service cost therefore only represents the increase of
the defined benefit obligation funded by the employer.
Given the nature of most Swiss pension plans, this will
better reflect the best estimate of the ultimate cost of the
benefits to the entity, when employee contributions are
applicable to a pension plan.
When the employee contributions are actually paid, both
the present value of the defined benefit obligation and
the fair value of the plan assets are increased with the
amount contributed. By accounting for employee
contributions in this way, there will be no impact on the
funded status and the profit or loss when contributions
are paid.
Example
In the example below, the employees contribute 8% of
their pensionable salary to the pension plan they
participate in.
The present value of the future employee contributions

amounts to CU150. Based on IAS 19R, the defined
benefit obligation will be adjusted to CU850.
In Switzerland, the risk sharing which will affect the
defined benefit obligation is a key issue. However, our
current understanding is that the impact on the overall
pension liability will be minor. There are currently various
methods discussed among actuaries how these IAS 19R
risk sharing provisions shall be reflected in their models.
Introduction of new disclosures
The amendments set objectives to improve the
understandability and usefulness of disclosures, allowing
users of financial statements to evaluate better the
financial effect of liabilities and assets arising from
defined benefit plans.
The revised standard outlines the following disclosure
objectives:
Explain the characteristics and related risks of defined
benefit plans.
Identify and explain the amounts in the financial
statements arising from defined benefit plans.
Describe how benefit plans may affect the amount,
timing, and uncertainty of future cash flows.
Many of the disclosure requirements of the current
IAS 19 standard have been carried forward into IAS 19R.
The requirement to disclose information about the
characteristics of defined benefit plans and risks
associated with them is not new. However, the revised
standard requires the new characteristics, for example:
information about the characteristics of its defined
benefit plans, including:
description of the regulatory framework in which
the plan operates, for example the level of any
minimum funding requirements, and any effect of
the regulatory framework on the plan, such as the
asset ceiling;
Liability (in red based on IAS 19R)

Defined benefit obligation (before
effect of employee contributions)
1,000 1,000
Present value of future employee

contributions
Defined benefit obligation (after
effect of employee contributions)
(150)
1,000
description of any other entitys responsibilities for

the governance of the plan, for example
responsibilities of plan trustees or of board
members;
850
11
description of risks to which the plan exposes the

entity, focused on any unusual, entity-specific or
plan-specific risks, and of any significant
concentrations of risk;
description of any plan amendments, curtailments and
settlements.
Although we may think that these new disclosures will
be narrative only, some additional quantitative
information is also required. The requirement to provide
a rollforward reconciliation for plan assets and the
defined benefit obligation is not new, but the items
required to be presented separately in the reconciliations
have been expanded. For example, in the past actuarial
gains and losses were disclosed in the aggregate.
The requirement to separately disclose actuarial gains
and losses from changes in demographic assumptions
and those from changes in financial assumptions is a
significant new requirement, which may require
additional information to be provided by the entitys
actuary.
An important note is that IAS 19R is effective for annual
periods beginning on or after 1 January 2013, with
earlier application being permitted. Retrospective
application is required, and so it will be important to
consider IAS 1s requirements around the presentation
of a statement of financial position as of the beginning
of the comparative period in case of retrospective
change in accounting (e.g., 1 January 2012 when then
entity adopts IAS 19R for its financial statements
beginning on 1 January 2013).
12
However, there are two exceptions to this retrospective

application:
When benefit costs are included in the carrying
amount of assets outside the scope of IAS 19
(e.g., inventories), these assets are not required to
be adjusted before the date of initial application
(the beginning of the earliest comparative period).
In financial statements for periods beginning before
1 January 2014, comparative information does not
need to be presented for the disclosures on the
sensitivity of the defined benefit obligation.
Appendix III gives examples of an early application of
the requirements of IAS 19R.
5. Other changes made by IAS 19R

for which less impact is expected
in Switzerland
In this chapter, the other changes made
by IAS 19R on defined benefit plan but
also on short-term employee benefits and
termination benefits, for which less
impact is expected in Switzerland, are
discussed in more detail.
The changes discussed in this chapter are:
clarification regarding the classification of defined
benefit plans;
change in the definition of short-term employee
benefits, and
clarification of the definition and recognition of
Clarification regarding the classification of
defined benefit plans
Under IAS 19R the classification of a pension plan as
defined contribution plan is clarified to certain extent.
The existence of a benefit formula can no longer solely
frustrate a classification of a pension plan as defined
contribution plan. In addition to this benefit formula the
entity should be required to provide further contributions
if assets are insufficient to meet the benefits in the plan
benefit formula in order to conclude with a classification
as defined contribution, according to paragraph 29a of
IAS 19R.
Besides the afore mentioned clarification, all actuarial
risk and investment risk should fall, in substance, on the
entity in order for the pension plan to be classified as a
defined benefit plan, according to paragraph 28 of
IAS 19R.
In certain jurisdictions, these types of risks are typically
shared between the entity, (former) participants and the
executer of the plan. Based on the interpretation of in
substance it is therefore expected that the classification
of certain defined benefit plans in these jurisdictions
might change to defined contribution plans, for example
in the Netherlands.
This clarification might have important implications for

pension plans executed by industry-wide multi-employer
pension funds. Such plans, when classified as defined
benefit plan under IAS 19, may be classified as defined
contribution plan under IAS 19R. This then better
reflects the actual arrangement between entities and
such pension funds, as in general for such plans the
entity is only required to pay an agreed contribution
relating to current service and does not run any risk of
additional contributions due to e.g. deficits in the
pension fund. A change of classification for these
pension plans results in less (strict) disclosure
requirements for the financial statements of the
affiliated entities.
The Swiss IAS 19 discussion group comprising audit
firms and actuaries has confirmed that the classification
of Swiss BVG/LPP pension plans, including so called
fully insured pension plans, will not change under the
revised standard.
Change in the definition of short-term employee
benefits
IAS 19R changes the definition of short-term employee
benefits. Short-term employee benefits under IAS 19 are
benefits that are due to be settled within twelve months
after the end of the period in which the employees
render the related service.
In contrast, under IAS 19R only benefits that are
expected to be settled wholly within twelve months
after the end of the annual reporting period in which
the employees render the related service are classified as
short-term employee benefits. The inclusion of
expected and wholly in the definition of short-term
employee benefits might lead to a change of
classification.
For example for annual leave (paid leave which is
accumulated by employees over time), it is in general
not required (or expected) that the accrued annual
leave is wholly used (settled) before the end of the next
annual reporting period. Due to the adjusted definition,
similar benefits classified as short-term employee
benefits under IAS 19 might be classified as long-term
employee benefits under IAS 19R.
13
Short-term employee benefits are accounted for on an

undiscounted basis in the period in which the service is
rendered. For employee benefits that classify as other
long-term employee benefits discounting is required and
e.g. salary increases should be incorporated. The change
of the definition might therefore have an impact on the
(net) balance sheet liability regarding those employee
benefits and therefore on the financial statements of an
entity.
The impact of the change of the definition of short-term
employee benefits is expected to be significant for
example in Australia, where annual leave is typically
treated as a short-term employee benefit under IAS 19.
The change of the definition of short-term employee
benefits under IAS 19R would therefore lead to a
reclassification as other long-term employee benefits.
For Switzerland, the legislation on annual leave
(Article 329 of the Swiss Code of obligations) is silent;
there should not be reclassification of annual leave as
other long-term employee benefits. The effect of the
change of the definition is therefore expected to be
limited in Switzerland.
Clarification of the definition and recognition of
termination benefits
The definition of termination benefits in IAS 19 includes
employee benefits that are payable as a result of an
employees decision to accept voluntary redundancy in
exchange for those benefits. In IAS 19R the definition
has been amended to clarify that an employee should
accept an offer of benefits in exchange for the
termination of employment. Employee benefits resulting
from termination of employment without an employers
offer or as a result of mandatory retirement requirements
are therefore not termination benefits but are
post-employment benefits.
14
IAS 19 states that termination benefits should be

recognised when the entity has demonstrated its
commitment either to terminate the employment of
employees before the normal retirement date or to
provide termination benefits as a result of an offer made
in order to encourage voluntary redundancy. The Board
clarified in IAS 19R that termination benefits should be
recognised at the earlier of the following dates:
(a) when the entity recognises costs for a restructuring
within the scope of IAS 37 Provisions, Contingent
Liabilities and Contingent Assets that included the
payment of termination benefits; and
(b) when the entity can no longer withdraw the offer of
those benefits.
Further guidance is given in IAS 19R as to when an
entity is no longer able to withdraw an offer of benefits
in exchange for termination of employment.
The impact of the clarification of the definition and
recognition of termination benefits is expected to be
significant for example in Italy and France, where the
termination benefits are commonly part of the terms of
employment between entities and their employees.
For Switzerland, this type of termination benefits is not
commonly applicable and therefore the impact is
expected to be limited.
6. Comparison of IAS 19R with IAS 19
In this chapter, the content of IAS 19R will be compared with the
content of IAS 19 in more detail. The first table below contains the
more significant differences between IAS 19R and IAS 19. The second
table contains several areas in which IAS 19R attempts to offer
clarification.
More significant differences
In the table below the more significant differences between IAS 19 and IAS 19R are presented.
Issue
IAS 19R
IAS 19
Presentation of net defined

The net defined liability or asset reflects

the full amount of the deficit/surplus of
the long-term employee benefit plans.
The net defined liability or asset does not

always reflect the amount of the deficit/
surplus of the long-term employee
benefit plans (Corridor method).
Presentation of defined
benefit cost
The defined benefit cost comprises:
Service cost, interest cost, expected

return on assets and/or reimbursement
rights, amortisation of past service cost,
the effect of curtailments and
settlements in profit or loss. Actuarial
gains and losses and changes in the
effect of the asset ceiling are recognised
either in profit or loss or OCI depending
on the accounting policy.
service cost recognised in profit or loss;

net interest on the net defined benefit
liability (asset) recognised in profit or
loss, and
remeasurements recognised in OCI.
Net interest on the net

defined benefit liability
(asset)/interest cost and
expected return on plan
assets
Net interest on the net defined benefit

liability (asset) is determined by
multiplying the net defined benefit
liability (asset) over the reporting period
by the discount rate (market yields on
high quality corporate bonds).
Interest cost is calculated by multiplying

the discount rate by the DBO over the
reporting period. Expected return on
plan assets is based on market
expectations for returns over the entire
lifetime of the related obligation.
Actuarial gains and losses

recognition
Deferral of the recognition of actuarial

gains and losses is not permitted.
Actuarial gains and losses are recognised
immediately in OCI. Reclassification of
amounts recognised in OCI to profit or
loss is not permitted.
Actuarial gains and losses can be

recognised immediately in profit or loss
or in OCI or deferred via the corridor
approach. Reclassification of amounts
recognised in OCI to profit or loss is not
permitted.
Past service cost

recognition
Recognised in full in profit or loss when

they occur.
Unvested past service cost is recognised

in profit or loss on a straight line basis
over the average vesting period.
15
Issue
IAS 19R
IAS 19
Taxes payable
Financial assumptions include taxes

payable by the plan on contributions
relating to service before the reporting
date or on benefits resulting from that
service.
No specific requirements.
Risk sharing employee

contributions
Non-discretionary contributions (set out in

the formal terms of the plan) by
employees in respect of service are
attributed to periods of service as a
negative benefit in accordance with the
projected unit credit method.
Discretionary contributions by employees
reduce service cost upon payment of
these contributions.
Contributions by employees to the

on-going cost of the plan reduce the
current service cost to the entity on a
cash basis.
Risk sharing liability ceiling
The present value of the DBO is

determined based on the ultimate cost
of the benefits, taking account of the
effect of any limit on contributions.
In determining the present value of the

DBO, no liability ceiling is taken into
account.
Risk sharing conditional

indexation
Actuarial assumptions will include future

benefit changes set out in formal terms
or based on a constructive obligation
regarding conditional indexation.
Curtailments and past

service costs
Past service cost is the change in the

present value of the defined benefit
obligation for employee service in prior
periods, resulting from a plan
amendment (the introduction or
withdrawal of, or changes to, a defined
benefit plan) or a curtailment (a
significant reduction by the entity in the
number of employees covered by a
plan).
A curtailment occurs when an entity

either: is demonstrably committed to
make a significant reduction in the
number of employees covered by a plan;
or amends the terms of a defined
benefit plan so that a significant element
of future service by current employees
will no longer qualify for benefits, or will
qualify only for reduced benefits.
Distinguishing between past service cost

and a curtailment is not necessary as
both are recognised immediately.
Past service cost is the change in the

present value of the defined benefit
obligation for employee service in prior
periods, resulting in the current period
from the introduction of, or changes to,
post-employment benefits or other longterm employee benefits.
Distinguishing between the two is
significant as the effects of a curtailment
are recognised immediately, whereas
past service costs are recognised over
the average period until vesting.
Remeasurement in interim
financial statements
16
Requirements of IAS 34 Interim Financial

Reporting are unchanged, but basis of
conclusions to IAS 19R note that entities
previously deferring recognition of some
gains and losses are now more likely to
judge that remeasurement is required for
interim reporting.
Pension cost for an interim period is

calculated on a year-to-date basis by
using the actuarially determined pension
cost rate at the end of the prior financial
year, adjusted for significant market
fluctuations since that time and for
significant curtailments, settlements, or
other significant one-off events.
Most significant clarifications

IAS 19R also contains clarifications on several areas in IAS 19. In the table below the most significant clarifications are
presented.
Issue
IAS 19R
IAS 19
Short-term employee
benefits definition
Employee benefits (other than

termination benefits) that are expected
to be settled wholly before twelve
months after the end of the annual
reporting period in which the employees
render the related service.
Employee benefits (other than

termination benefits) that are due to be
settled within twelve months after the
end of the period in which the
employees render the related service.
Past service cost timing
Past service cost are recognised fully in

profit or loss at the earlier of the date on
which the related restructuring cost or
termination benefits are recognised and
the date
Past service cost are recognised in profit

or loss when an entity introduces a
defined benefit plan that attributes
benefits to past service or changes the
benefits payable for past service under
an existing defined benefit plan, to the
extent that the benefits are vested.
Settlement definition
A settlement occurs when an entity

enters into a transaction that eliminates
all further legal or constructive
obligation for part or all of the benefits
provided under a defined benefit plan,
other than a payment of benefits to, or
on behalf of, employees that is set out in
the terms of the plan and included in the
actuarial assumptions. For example, a
one-off transfer of significant employer
obligations under the plan to an
insurance company through the
purchase of an insurance policy would
be classified as a settlement. A lumpsum cash payment is made under the
terms of the plan to, or on behalf of,
plan participants in exchange for their
rights to receive specified postemployment benefits; this is not
classified as a settlement.
A settlement occurs when an entity

enters into a transaction that eliminates
all further legal or constructive
obligation for part or all of the benefits
provided under a defined benefit plan.
Mortality assumption
determination
Mortality assumptions are based on the

entitys best estimate of the mortality of
plan members during and after
employment and include expected
changes in mortality for example using
estimates of mortality improvements.
Mortality assumptions are based on the

entitys best estimate of the mortality of
plan members during and after
employment.
Return on plan assets cost

deduction
In determining the return on plan assets,

an entity should only deduct the cost of
managing the plan assets.
In determining the expected return on

plan assets, an entity should deduct
the cost of administering the plan
(other than included in the actuarial
assumptions used to measure the DBO).
17
18
Issue
IAS 19R
IAS 19
Termination benefits
definition
Termination benefits are benefits that

arise from the termination of
employment rather than employee
service. Termination benefits can result
from either an entitys decision to
terminate the employment or an
employees decision to accept an entitys
offer of benefits in exchange for
termination of employment.
Termination benefits are employee

benefits payable as a result of either an
entitys decision to terminate an
employees employment before the
normal retirement date or an employees
decision to accept voluntary redundancy
in exchange for those benefits.
timing
An entity shall recognise a liability and

expense at the earlier of the date when
the entity recognises related restructuring
costs and the date when the entity can no
longer withdraw the offer of the
An entity shall recognise termination

benefits as a liability and an expense
when, and only when, the entity is
demonstrably committed to either
terminate the employment of an
employee or group of employees before
the normal retirement date; or provide
termination benefits as a result of an
offer made in order to encourage
voluntary redundancy.
Defined contribution plans

definition
DC plans are post-employment benefit

plans under which an entity pays fixed
contributions into a separate entity and
will have no legal or constructive
obligation to pay further contributions if
the fund does not hold sufficient assets.
In consequence, actuarial risk (that
benefits will be less than expected) and
investment risk (that assets invested will
be insufficient to meet expected
benefits) fall, in substance, on the
employee.
DC plans are post-employment benefit

plans under which an entity pays fixed
contributions into a separate entity and
will have no legal or constructive
obligation to pay further contributions if
the fund does not hold sufficient assets.
In consequence, actuarial risk (that
benefits will be less than expected) and
investment risk (that assets invested will
be insufficient to meet expected
benefits) fall on the employee.

classification
A legal or constructive obligation that

frustrates a DC classification arises due
to a plan formula that is not solely linked
to the amount of contributions and
requires the entity to provide further
contributions if assets are insufficient to
meet the benefits in the plan benefit
formula.
A legal or constructive obligation that

frustrates a DC classification arises due
to a plan formula that is not solely linked
to the amount of contributions.
Multi-employer plans exit
An entity recognises and measures a

liability that arises from the wind-up of a
multi-employer defined benefit plans, or
the entitys withdrawal from a multiemployer defined benefit plan in
accordance with IAS 37.
Appendix I Disclosure requirements
In the table below, a summary of the disclosure requirements for

defined benefit post-employment benefit plans under IAS 19R is
presented.
Paragraph
Disclosure requirement
General disclosure requirements

135
a) Explanation of characteristics and risks associated with all defined benefit plans.
b) Identification and explanation of amounts in the financial statements.
c) How defined benefit plans may affect the amount, timing and uncertainty of future cash
flows.
136
In meeting the objectives of paragraph 135, consider:

a) level of detail necessary;
b) emphasis on each of the various requirements;
c) how much aggregation or disaggregation to undertake; and
a) whether users need additional information to evaluate quantitative information.
137
If the detailed disclosures are not sufficient to meet the requirements of paragraph 135,
additional information should be provided.
138
Disaggregation of disclosures should be based on materially different risks.
Characteristics of defined benefit plans and risks associated with them.

139
a) Disclosure of the characteristics of the plan, including:

i) the nature of the benefits;
ii) a description of the regulatory framework; and
iii) governance responsibilities;
b) Description of the risks to which the plan exposes the entity; and
d) Description of plan amendments, curtailments and settlements.
Explanation of amounts in the financial statements

140
Reconciliation from the opening balance to the closing balance for

a) The net defined benefit liability, showing separately:
i) plan assets;
ii) present value of the defined benefit obligation, and
iii) the effect of the asset ceiling;
b) reimbursement rights.
19
Paragraph
141
Reconciliations as determined should include:

a) current service cost;
b) interest income or expense;
c) remeasurements, showing separately:
i) return on plan assets excluding interest income;
ii) actuarial gains or losses and experience gains or losses from demographic assumptions;
iii) actuarial gains or losses and experience gains or losses from financial assumptions; and
iv) the effect of the asset ceiling;
d) past service cost and gains or losses arising from settlements;
e) foreign exchange rate effects;
f) employer and employee contributions;
g) benefit payments from the plan; and
h) the effect of business combinations and disposals.
142
Disaggregation of the fair value of plan assets into different asset classes distinguished on the
nature and risks of the plan assets.
143
Disclosure of the fair value of the entitys own transferable financial instruments held as
plan assets.
144
Disclosure of significant actuarial assumptions in absolute terms.
Amount, timing and uncertainty of future cash flows

145
Indication of sensitivity of measurement of defined benefit obligation:

a) sensitivity analysis;
b) methods and assumptions used to perform the sensitivity analysis; and
c) changes in preparing the sensitivity analysis.
146
Description of asset liability matching strategies.
147
Indication of the effect of the defined benefit plan on the entitys future cash flows:
a) description of any funding agreements and funding policy;
b) expected contributions in the next reporting period; and
c) information about the maturity profile of the defined benefit plan, e.g. the weighted average
duration of the plan.
Multi-employer plans
148
20
Entities that participate in multi-employer defined benefit plans, should disclose:

a) a description of funding arrangements;
b) a description of the extent to which entity is liable for other entities obligations;
c) a description of any agreed deficit/surplus allocation on:
i) wind-up; or
ii) entitys withdrawal from the plan;
d) when defined benefit plan is accounted as defined contribution plan (according to IAS19.34):
i) the fact that the plan is a defined benefit plan;
ii) the reason why sufficient information is not available;
iii) information concerning future contributions;
iv) information about the deficit/surplus that may affect future contributions;
v) indication of the level of participation compared to other participating entities.
Examples of measures that might provide an indication:
1. The entitys proportion of the total contributions to the plan;
2. The entitys proportion of the total number of participants.
Paragraph
Defined benefit plans that share risks between entities under common control
149
Entities that participate in a defined benefit plan that shares risks between entities under
common control should disclose:
a) the contractual agreement or stated policy for charging the net defined benefit cost or the
fact that there is no such policy;
b) the policy for determining the contribution to be paid by the entity;
c) if the entity accounts for an allocation of the net defined benefit cost as noted in paragraph
41, all the information about the plan as a whole required by paragraphs 135-147; and
a) if the entity accounts for the contribution payable for the period as noted in paragraph 41,
the information about the plan as a whole required by paragraphs 135-137, 139, 142-144
and 147(a) and (b).
150
The information required by paragraph 149(c) and (d) can be disclosed by cross-reference to
disclosures in another group entitys financial statements if:
a) that group entitys financial statements separately identify and disclose the information
required about the plan; and
b) that group entitys financial statements are available to users of the financial statements on
the same terms as the financial statements of the entity and at the same time as, or earlier
than, the financial statements of the entity.
Disclosure requirements in other IFRSs that may be applicable

151
IAS 24 Related Party Disclosures.
152
IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
21
Appendix II Comparison of IAS 19R

with US GAAP
In the table below, the content of IAS 19R will be compared with the
content of US GAAP in more detail.
22
Subject
IAS 19R
US GAAP
Recognition of prior service cost
Immediately recognised in profit or

loss as part of service cost
component.
Prior service costs are immediately

recognised in OCI and amortised
over the remaining service period
(or life expectancy if all or almost all
of the participants are inactive) to
profit or loss.
Recognition of actuarial gains and

losses
Immediately recognised through

OCI as part of the remeasurement
component. No recycling from OCI
to profit or loss.
Immediately recognised either

through OCI or in profit or loss.
Amounts recognised through OCI
are subsequently recycled to profit
or loss by adopting either the
corridor approach or a systematic
method that results in faster
recycling.
Expected return on plan assets
Not applicable (the market yield

based interest income is included in
the net interest component and
recognised in profit or loss).
Calculated by applying the

expected long-term rate on return
on plan assets to the marketrelated value of the plan assets.
Recognised in profit or loss.
Recognition of gains/losses on a
curtailment
Gains/losses are recognised as of

the earlier the date of curtailment
occurs or related restructuring costs
or termination benefits are
recognised. Amounts are included
in the service cost component.
A curtailment loss is recognised

when it is probable that a
curtailment will occur and the
effects are reasonably estimable.
A curtailment gain is recognised
when the relevant employees are
terminated or the plan suspension
or amendment is adopted, which
could occur after the entity is
demonstrably committed and a
curtailment is announced.
The significance test is based on
the number of years of service
eliminated, not the number of
employees.
Appendix III Early application

IAS 19 Employee Benefits (as revised
in June 2011)
This Appendix is an extract of the Deloitte
global publication: IFRS Model Financial
Statements 2011 (with early application of
new and revised Standards and Interpretations
that are not mandatorily effective on
1 January 2011) available at
http://www.iasplus.com/fs/
2011modelfsearlyadoption.pdf.
This appendix gives you examples of the application of
the requirements of IAS 19 (as revised in 2011).
Key assumptions used in the preparation of this
appendix are as follows:
International GAAP Holdings Limited is assumed to
have early applied IAS 19 (as revised in 2011) in the
current year in advance of its effective date. 1 January
2010 is considered to be the date of initial application
of this Standard. These changes have resulted in
changes in amounts reported in the financial
statements (see note 2).
IAS 19 (as revised in 2011) has been applied
retrospectively in accordance with IAS 8 and the
relevant transitional provisions of IAS 19.172 and
.173. In this appendix, for illustrative purposes,
amounts for the comparative period 2010 are
restated. Therefore, a statement of financial position
as at the beginning of the earliest comparative period
in accordance with IAS 1.10(f) is included.
For simplicity purposes, this appendix assumes that the

taxing authorities in the jurisdictions where the Group
operates adopts all of the amendments to IAS 19 (as
revised 2011) retrospectively such that there are no
deferred income tax implications resulting from the
change in accounting policy with respect to the
application of IAS 19 (as revised in 2011). This may not
always be the case. Taxing authorities may choose to
not adopt some or all of the amendments to IAS 19
or may choose to adopt the amendments to IAS 19
prospectively only. In these cases, there would likely
be deferred income tax implications that should be
reflected in the financial statements and notes thereto.
The financial statements and appendix do reflect the
current income tax effect of the application of IAS 19
(as revised in 2011) for the current and prior year
(restated) effect on profit or loss and other
comprehensive income. For completeness, the entire
income tax footnote is included in the appendix.
For details of the disclosure and presentation
requirements of IAS 19 (as revised in 2011), readers
should refer to Deloitte's 2011 IFRS Compliance,
Presentation and Disclosure Checklist. This checklist can
be downloaded from Deloitte's web site
www.iasplus.com
Note that in this appendix, we have included line items
for which a nil amount is shown, so as to illustrate items
that, although not applicable to International GAAP
Holdings Limited, are commonly encountered in
practice. This does not mean that we have illustrated all
possible disclosures. Nor should it be taken to mean
that, in practice, entities are required to display line
items for such nil' amounts.
This appendix does not include a full set of financial

statements; only the statement of financial position,
income statement, statement of comprehensive income,
statement of changes in equity, statement of cash flows
and certain notes affected by IAS 19 (as revised in 2011)
are included. Regarding the statement of comprehensive
income, the two-statement presentation method is used
and expenses are aggregated according to their nature.
In addition, regarding the statement of cash flows,
the direct method is used to report cash flows from
operating activities.
23
Contents
Page
Consolidated income statement
25
Consolidated statement of comprehensive income
26
Consolidated statement of financial position
27
Consolidated statement of changes in equity
29
Consolidated statement of cash flows
31
Notes to the consolidated financial statements, including:
24
Application of new and revised International Financial Reporting Standards
32
Significant accounting policies
33
10 Income taxes relating to continuing operations
34
13 Profit for the year from continuing operations
36
14 Earnings per share
37
39 Retirement benefit plans
38
Source
International GAAP Holdings Limited

Consolidated income statement
for the year ended 31 December 2011
Notes
Year
ended
31/12/11
Year
ended
31/12/10
CU000
CU000
(restated)
140,918
3,608
647
7,134
(84,659)
(11,193)
(10,553)
(4,418)
(3,120)
(10,268)
1,186
581
151,840
2,351
1,005
2,118
(85,413)
(13,878)
(11,951)
(6,023)
(1,926)
(8,005)
1,589
29,863
(11,432)
31,707
(11,672)
18,431
20,035
8,310
9,995
26,741
30,030
22,741
4,000
27,267
2,763
26,741
30,030
Basic (cents per share)
130.5
135.5
Diluted (cents per share)
114.0
129.1
Basic (cents per share)
82.8
85.8
Diluted (cents per share)
72.5
81.8
Continuing operations
Revenue
Investment income
Other gains and losses
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Depreciation and amortisation expenses
Employee benefits expense
Finance costs
Consulting expense
Other expenses
Share of profits of associates
Gain recognised on disposal of interest in former associate
Other [describe]
Profit before tax
Income tax expense
13
10
Profit for the year from continuing operations

Discontinued operations
Profit for the year from discontinued operations
Profit for the year
Attributable to:
Owners of the Company
Non-controlling interests
Earnings per share
14
From continuing and discontinued operations
From continuing operations
Note: The format outlined above aggregates expenses according to their nature.
25
Source

Consolidated statement of comprehensive income
Year
ended
31/12/11
Year
ended
31/12/10
CU000
CU000
(restated)
26,741
30,030
75
121
(12)
(166)
46
(57)
121
94
81
94
81
436
(123)
316
(86)
(257)
(201)
56
29
Gain on revaluation of properties
1,643
Share of other comprehensive income of associates
Remeasurement of defined benefit obligation
806
191
Income tax relating to components of other comprehensive income
(269)
(619)
27,371
31,476
23,371
4,000
28,713
2,763
27,371
31,476
Profit for the year

Other comprehensive income
Exchange differences on translating foreign operations
Exchange differences arising during the year
Loss on hedging instruments designated in hedges of the net assets
of foreign operations
Reclassification adjustments relating to foreign operations disposed
of in the year
Reclassification adjustments relating to hedges of the net assets of
foreign operations disposed of in the year
Available-for-sale financial assets

Net gain on available-for-sale financial assets during the year
Reclassification adjustments relating to available-for-sale financial
assets disposed of in the year
Cash flow hedges

Gains arising during the year
Reclassification adjustments for amounts recognised in profit or loss
Adjustments for amounts transferred to the initial carrying amounts
of hedged items
Total comprehensive income for the year

Total comprehensive income attributable to:
Owners of the Company
26
Source

at 31 December 2011
Notes
31/12/11
31/12/10
01/01/10
CU000
CU000
(restated)
CU000
(restated)
Property, plant and equipment

Investment property
Goodwill
Other intangible assets
Investments in associates
Deferred tax assets
Finance lease receivables
Other financial assets
Other assets
109,783
1,968
20,285
9,739
7,402
2,083
830
10,771
135,721
1,941
24,060
11,325
7,270
1,964
717
9,655
161,058
170
23,920
12,523
5,706
1,843
739
7,850
Total non-current assets
162,861
192,653
213,809
Inventories
Trade and other receivables
Finance lease receivables
Amounts due from customers under construction contracts
Other financial assets
Current tax assets
Other assets
Cash and bank balances
31,213
19,249
198
240
8,757
125
23,446
28,982
14,658
188
230
6,949
60
19,778
29,688
13,550
182
697
5,528
81
9,082
Assets classified as held for sale
83,228
22,336
70,845
58,808
Total current assets
105,564
70,845
58,808
Total assets
268,425
263,498
272,617
Assets
Non-current assets
Current assets
Note:
IAS 1.10(f) requires that an entity should present a statement of financial position as at the beginning of the
earliest comparative period when it applies an accounting policy retrospectively or makes a retrospective
restatement of items in its financial statements, or when it reclassifies items in its financial statements.
In this appendix, the application of IAS 19 (as revised in 2011) has resulted in retrospective restatement of items
in the financial statements (see note 2). Therefore, this appendix includes an additional statement of financial
position.
In some jurisdiction, where it is required to distinguish between distributable reserves and non-distributable
reserves, it could be appropriate to create a separate reserve for accumulating the remeasurement of net
defined benefit asset (liability) recognised through other comprehensive income.
27
Source

at 31 December 2011 continued
Notes
31/12/11
31/12/10
01/01/10
CU000
CU000
(restated)
CU000
(restated)
32,439
4,237
111,440
48,672
3,376
95,288
48,672
1,726
74,366
Equity and liabilities

Capital and reserves
Issued capital
Reserves
Retained earnings
148,116
147,336
124,764
Amounts recognised directly in equity relating

to assets classified as held for sale
Equity attributable to owners of the Company
148,116
147,336
124,764
24,316
20,005
17,242
172,432
167,341
142,006
17,868
15,001
1,954
6,729
2,294
59
180
29,807
1,482
5,657
2,231
165
270
25,785
2,194
4,436
4,102
41
44,085
39,612
36,558
16,373
36
22,446
116
5,542
3,356
265
90
21,220
15
25,600
18
6,030
3,195
372
95
52,750
245
33,618
5,142
2,235
63
48,224
56,545
94,053
3,684
Total current liabilities
51,908
56,545
94,053
Total liabilities
95,993
96,157
130,611
268,425
263,498
272,617
Total equity
Non-current liabilities
Borrowings
Other financial liabilities
Retirement benefit obligation
Deferred tax liabilities
Provisions
Deferred revenue
Other liabilities
39
10
Total non-current liabilities

Current liabilities
Trade and other payables
Amounts due to customers under construction contracts
Borrowings
Other financial liabilities
Current tax liabilities
Provisions
Deferred revenue
Other liabilities
Liabilities directly associated with assets classified as held for sale
Total equity and liabilities
28
10
Source

Consolidated statement of changes in equity
Balance at 1 January 2010

Adjustments (note 2)
As restated
Share
capital
Share
premium
General
reserve
Properties
revaluation
reserve
CU000
CU000
CU000
CU000
23,005
25,667
807
51
23,005
25,667
807
51
Profit for the year (restated)

Other comprehensive income for the year,
net of income tax (restated)
1,150
Total comprehensive income for the year (restated)
1,150
Recognition of share-based payments

Payment of dividends
23,005
25,667
807
1,201
Profit for the year

Other comprehensive income for the year, net of income tax
Total comprehensive income for the year
Payment of dividends
Additional non-controlling interests arising on the
acquisition of Subsix Limited (note 44)
Additional non-controlling interests relating to outstanding
share-based payment transactions of Subsix Limited (note 44)
Disposal of partial interest in Subone Limited (note 19)
Recognition of share-based payments
Issue of ordinary shares under employee share option plan
Issue of ordinary shares for consulting services performed
Issue of convertible non-participating preference shares
Issue of convertible notes
Share issue costs
Buy-back of ordinary shares
Share buy-back costs
Transfer to retained earnings
Income tax relating to transactions with owners
314
3
100
(5,603)
(6)
(10,853)
(277)
84
(3)
17,819
14,620
807
1,198
Balance at 31 December 2010 (restated)
Balance at 31 December 2011
Note:
In this appendix, it was assumed that the Group sponsors funded defined benefit plans for qualifying
employees of its 100% subsidiaries. The application of IAS 19 (as revised in 2011) therefore does not result in
any effect on non-controlling interests.
29
Source
30
Investments
revaluation
reserve
Equity-settled
employee
benefits
reserve
Cash flow
hedging
reserve
Foreign
currency
translation
reserve
Option
premium on
convertible
notes
Retained
earnings
Attributable to
owners
of the parent
Noncontrolling
interests
Total
CU000
CU000
CU000
CU000
CU000
CU000
CU000
CU000
CU000
470
258
140
73,824
124,222
17,242
141,464
542
542
542
470
258
140
74,366
124,764
17,242
142,006
27,267
27,267
2,763
30,030
57
20
85
134
1,446
1,446
57
20
85
27,401
28,713
2,763
31,476
338
(6,479)
338
(6,479)
338
(6,479)
527
338
278
225
95,288
147,336
20,005
167,341
66
39
(39)
22,741
564
22,741
630
4,000
26,741
630
66
39
(39)
23,305
23,371
4,000
27,371
(6,635)
(6,635)
(6,635)
127
127
206
834
(242)
34
(555)
5
34
206
314
8
100
834
(6)
(17,011)
(277)
(158)
5
179
213
206
314
8
100
834
(6)
(17,011)
(277)
(158)
593
544
317
186
592
111,440
148,116
24,316
172,432
Source

Consolidated statement of cash flows
Notes
Year
ended
31/12/11
Year
ended
31/12/10
CU000
CU000
(restated)
211,190
(163,020)
214,497
(181,490)
Cash generated from operations

Interest paid
Income taxes paid
48,170
(4,493)
(13,848)
33,007
(6,106)
(13,340)
Net cash generated by operating activities
29,829
13,561
(1,890)
2,315
1,137
30
156
(738)
189
(22,932)
11,462
(10)
(6)
(477)
7,566
51
1,054
1,143
25
154
(4,311)
1,578
(11,875)
21,245
(1,532)
58
(358)
120
(3,198)
7,352
Proceeds from issue of equity instruments of the Company

Proceeds from issue of convertible notes
Payment for share issue costs
Payment for buy-back of shares
Payment for share buy-back costs
Proceeds from issue of redeemable preference shares
Proceeds from issue of perpetual notes
Payment for debt issue costs
Proceeds from borrowings
Repayment of borrowings
Proceeds from government loans
Proceeds on disposal of partial interest in a subsidiary that does
not involve loss of control
Dividends paid on redeemable preference shares
Dividends paid to owners of the Company
414
4,950
(6)
(17,011)
(277)
15,000
2,500
(595)
16,953
(37,761)
24,798
(23,209)
3,000
213
(613)
(6,635)
(6,479)
Net cash used in financing activities
(22,868)
(1,890)
3,763
19,023
19,400
561
(80)
(184)
23,083
19,400
Cash flows from operating activities

Receipts from customers
Payments to suppliers and employees
Cash flows from investing activities

Payments to acquire financial assets
Proceeds on sale of financial assets
Interest received
Royalties and other investment income received
Dividends received from associates
Other dividends received
Amounts advanced to related parties
Repayments by related parties
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Payments for investment property
Proceeds from disposal of investment property
Payments for intangible assets
Net cash outflow on acquisition of subsidiaries
Net cash inflow on disposal of subsidiary
Net cash inflow on disposal of associate
Net cash (used in)/generated by investing activities
Cash flows from financing activities
Net increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on the balance of cash
held in foreign currencies
Cash and cash equivalents at the end of the year
Note:
The above illustrates the direct method of reporting cash flows from operating activities.
31
Source
IAS 1.10(e),
51(b),(c)
Notes to the consolidated financial statements

2. Application of new and revised International Financial Reporting Standards (IFRSs)
2.1 New and revised IFRSs affecting amounts reported in the current year (and/or prior years)
New and revised IFRSs affecting the reported financial performance and/or financial position
IAS 8.28(a)
Change in accounting policy due to the early application of IAS 19 (as revised in 2011) Employee Benefits
IAS 8.28(b),(c)
IAS 19.172
IAS 19.173(a)
IAS 8.28(d),(e)
In the current year, the Group has applied IAS 19 (as revised June 2011) Employee Benefits and the related consequential
amendments in advance of their effective dates. The Group has applied IAS 19 (as revised in 2011) retrospectively and in
accordance with the transitional provisions as set out in IAS 19.173 (as revised in 2011). These transitional provisions do
not have an impact on future periods. The opening statement of financial position of the earliest comparative period
presented (01 January 2010) has been restated.
The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most significant
change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the
recognition of changes in defined benefit obligations and in fair value of plan assets when they occur, and hence eliminate
the corridor approach permitted under the previous version of IAS 19 and accelerate the recognition of past service costs.
All actuarial gains and losses are recognised immediately through other comprehensive income in order for the net pension
asset or liability recognised in the consolidated statement of financial position to reflect the full value of the plan deficit or
surplus. Furthermore, the interest cost and expected return on plan assets used in the previous version of IAS 19 are
replaced with a net-interest amount under IAS 19 (as revised in 2011), which is calculated by applying the discount rate
to the net defined benefit liability or asset. IAS 19 (as revised in 2011) introduces certain changes in the presentation of the
defined benefit cost including more extensive disclosures.
IAS 19.173
IAS 8.22
Impact of early application of IAS 19 (as revised in 2011)

These 2011 consolidated financial statements are the first financial statements in which the Group has early adopted
IAS 19 (as revised in 2011). IAS 19 (as revised in 2011) has been adopted retrospectively in accordance with IAS 8.
Consequently, the Group has adjusted opening equity as of 1 January 2010 and the figures for 2010 have been restated as
if IAS 19 (as revised in 2011) had always been applied.
IAS 8.28(f)(i)
32
Retirement
benefit
obligation
Current tax
liability
Equity
CU000
CU000
CU000
Balance as reported at 1 January 2010

Effect of early application of IAS 19 (as revised in 2011)
2,968
(774)
4,910
232
141,464
542
Restated balance at 1 January 2010
2,194
5,142
142,006
Retirement
benefit
obligation
Current tax
liability
Equity
CU000
CU000
CU000
Balance as reported at 31 December 2010

Effect of early application of IAS 19 (as revised in 2011)
Effect on total comprehensive income for the year
2,023
(774)
233
5,868
232
(70)
166,962
542
(163)
Restated balance at 31 December 2010
1,482
6,030
167,341
Source
IAS 1.10(e)
51(b),(c)

The effect on the consolidated income statement was as follows:
2011
2010
CU000
CU000
(Increase)/decrease of employee benefit expenses

Decrease/(increase) of income tax expense
(440)
132
(424)
127
(Decrease)/increase of profit for the year
(308)
(297)
The effect on the consolidated statement of comprehensive income was as follows:

2011
2010
CU000
CU000
Remeasurement of defined benefit obligation

(Increase)/decrease of income tax relating to components
of other comprehensive income
Increase of other comprehensive income
806
191
(242)
564
(57)
134
Increase/(decrease) of total comprehensive income for the year
256
(163)
3. Significant accounting policies

Note:
IAS 19
The note below only illustrates accounting policies regarding retirement benefit costs and termination benefits.
Regarding impact of other new and revised Standards, please refer to Section 2 of this publication and other
appendices.
3.15 Retirement benefit costs and termination benefits

Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered
service entitling them to the contributions.
IAS 19.66
IAS 19.122
IAS 19.120
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected Unit Credit
Method, with actuarial valuations being carried out at the end of each reporting period. Remeasurement comprising of
actuarial gains and losses, the effect of the asset ceiling (if applicable) and the return on plan assets (excluding interest) are
recognised immediately in the statement of financial position with a charge or credit to other comprehensive income in the
period in which they occur. Remeasurement recorded in other comprehensive income is not recycled. However, the entity
may transfer those amounts recognized in other comprehensive income within equity. Past service cost is recognised in
profit or loss in the period of plan amendment. Net-interest is calculated by applying the discount rate to the net defined
benefit liability or asset. Defined benefit costs are split into three categories:
service cost, past-service cost, gains and losses on curtailments and settlements;
net-interest expense or income;
IAS 19.134, 135
remeasurement.
The Group presents the first two components of defined benefit costs in the line item employee benefits expense in its
consolidated income statement (by nature of expenses aggregation). Curtailments gains and losses are accounted for as
past-service cost.
Remeasurement are recorded in other comprehensive income
IAS 19.8, 64
The retirement benefit obligation recognised in the consolidated statement of financial position represents the actual
deficit or surplus in the Groups defined benefit plans. Any surplus resulting from this calculation is limited to the present
value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to
the plans.
IAS 19.165
A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the
termination benefit and when the entity recognises any related restructuring costs.
33
Source

for the year ended 31 December 2011 continued
10. Income taxes relating to continuing operations
10.1 Income tax recognised in profit or loss
IAS 12.79
Current tax
Current tax expense in respect of the current year
Adjustments recognised in the current year in relation to the current tax
of prior years
Other [describe]
Deferred tax
Deferred tax expense recognised in the current year
Deferred tax reclassified from equity to profit or loss
Adjustments to deferred tax attributable to changes in tax rates and laws
Write-downs (reversals of previous write-downs) of deferred tax assets
Other [describe]
Total income tax expense recognised in the current year relating to

continuing operations
IAS 12.81(c)
Income tax expense calculated at 30% (2010: 30%)

Effect of income that is exempt from taxation
Effect of expenses that are not deductible in determining taxable profit
Effect of concessions (research and development and other allowances)
Impairment losses on goodwill that are not deductible
Effect of unused tax losses and tax offsets not recognised as deferred tax assets
Effect of previously unrecognised and unused tax losses and deductible temporary
differences now recognised as deferred tax assets
Effect of different tax rates of subsidiaries operating in other jurisdictions
Effect on deferred tax balances due to the change in income tax rate
from xx% to xx% (effective [insert date])
Other [describe]
Adjustments recognised in the current year in relation to the current tax

of prior years
Income tax expense recognised in profit or loss (relating to continuing operations)
IAS 12.81(c)
34
Year
ended
31/12/10
CU000
CU000
(restated)
9,939
11,220
9,939
11,220
1,643
(150)
538
(86)
1,493
452
11,432
11,672
Year
ended
31/12/11
Year
ended
31/12/10
CU000
CU000
(restated)
29,863
31,707
8,959
(30)
2,562
(75)
5
9,512
2,221
(66)
11
11,432
11,672
11,432
11,672
The income tax expense for the year can be reconciled to the accounting profit as follows:
Profit before tax from continuing operations
IAS 12.81(d)
Year
ended
31/12/11
The tax rate used for the 2011 and 2010 reconciliations above is the corporate tax rate of 30% payable by corporate
entities in A Land on taxable profits under tax law in that jurisdiction.
Source

IAS 12.81(ab)
10.3 Income tax recognised in other comprehensive income

Year
ended
31/12/11
Year
ended
31/12/10
CU000
CU000
(restated)
242
57
22
36
(4)
28
24
131
95
493
177
648
(37)
(36)
(26)
(73)
(26)
Arising on gains/losses of hedging instruments in cash flow hedges

transferred to the initial carrying amounts of hedged items
(77)
(60)
Total income tax recognised in other comprehensive income
269
619
Current tax
Current tax on remeasurement of defined benefit obligation
Deferred tax
Arising on income and expenses recognised in other comprehensive income:
Translation of foreign operations
Fair value remeasurement of hedging instruments entered into for a
hedge of a net investment in a foreign operation
Fair value remeasurement of available-for-sale financial assets
Fair value remeasurement of hedging instruments entered into for
cash flow hedges
Property revaluations
Other [describe]
Arising on income and expenses reclassified from equity to profit or loss:

Relating to cash flow hedges
Relating to available-for-sale financial assets
On disposal of a foreign operation
35
Source

10.4 Current tax assets and liabilities
Current tax assets

Benefit of tax losses to be carried back to recover taxes
paid in prior periods
Tax refund receivable
Other [describe]
Current tax liabilities

Income tax payable
Current tax effect of early application of IAS 19 (as revised in 2011)
Income tax relating to components of OCI
Other [describe]
31/12/11
31/12/10
01/01/10
CU000
CU000
(restated)
CU000
(restated)
125
60
81
125
60
81
5,270
(259)
531
5,868
(127)
289
4,910
232
5,542
6,030
5,142
Year
ended
31/12/11
Year
ended
31/12/10
CU000
CU000
(restated)
160
1,336
148
852
1,496
1,000
206
338
206
338
8,851
10,613
10,553
11,951
13. Profit for the year from continuing operations
13.5 Employee benefits expense
IAS 19.51
IAS 19.56-60
IFRS 2.50
IFRS 2.51(a)
IFRS 2.51(a)
Post-employment benefits (see note 39)

Defined benefit plans
Share-based payments (see note 42.1)

Equity-settled share-based payments
Cash-settled share-based payments
IAS 19.165, 169
Other employee benefits
IAS 1.104
Total employee benefits expense
36
Source

14. Earnings per share
14.3 Impact of changes in accounting policies
IAS 8.28(f), (ii)
Changes in the Groups accounting policies during the year are described in detail in note 2.1. To the extent that those
changes have had an impact on results reported for 2011 and 2010, they have had an impact on the amounts reported for
earnings per share.
The following table summarises that effect on both basic and diluted earnings per share.
Increase (decrease)
in profit for the year
attributable to the owners
of the Company
Year
ended
Year
ended
31/12/11
Increase (decrease)
in basic
earnings per share
Increase (decrease)
in diluted
earnings per share
31/12/10
Year
ended
Cents
31/12/11
Year
ended
Cents
31/12/10
Year
ended
Cents
31/12/11
Year
ended
Cents
31/12/10
CU000
CU000
Cents
per share
Cents
per share
Cents
per share
Cents
per share
(308)
(297)
(1.8)
(1.5)
(1.5)
(1.4)
(308)
(297)
(1.7)
(1.5)
(1.5)
(1.4)
Changes in accounting policies relating to:

Effect of early application of IAS 19
(as revised in 2011)
Others (please specify)
37
Source

39. Retirement benefit plans
39.1 Defined contribution plans
The Group operates defined contribution retirement benefit plans for all qualifying employees of its subsidiary in C Land.
The assets of the plans are held separately from those of the Group in funds under the control of trustees. Where
employees leave the plans prior to full vesting of the contributions, the contributions payable by the Group are reduced by
the amount of forfeited contributions.
IAS 19.43
The employees of the Group's subsidiary in B Land are members of a state-managed retirement benefit plan operated by
the government of B Land. The subsidiary is required to contribute a specified percentage of payroll costs to the retirement
benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit plan is to
make the specified contributions.
IAS 19.53
The total expense recognised in the consolidated [statement of comprehensive income/income statement] of CU160,000
(2010: CU148,000) represents contributions payable to these plans by the Group at rates specified in the rules of the plans.
As at 31 December 2011, contributions of CU8,000 (2010: CU8,000) due in respect of the 2011 (2010) reporting period
had not been paid over to the plans. The amounts were paid subsequent to the end of the reporting period.
39.2 Defined benefit plans
IAS 19.139
The Group sponsors funded defined benefit plans for qualifying employees of its subsidiaries in A Land. The defined benefit
plan is administered by a separate Fund that is legally separated from the entity. The board of the pension fund is
composed of an equal number of representatives from both employers and (former) employees. The board of the pension
fund is required by law or by articles of association to act in the interest of the fund and of all relevant stakeholders in the
scheme, i.e. active employees, inactive employees, retirees, employers. The board of the pension fund is responsible for the
investment policy with regard to the assets of the fund.
Under the plans, the employees are entitled to post-retirement yearly installments amounting to 1.75% of final salary for
each year of service until the retirement age of 65. The pensionable salary is limited to CU 20. The pensionable salary is the
difference between the current salary of the employee and the state retirement benefit. In addition, the service period is
limited to 40 years resulting in a maximum yearly entitlement (life-long annuity) of 70% of final salary.
The plans in A-land typically expose the company to actuarial risks such as: investment risk, interest rate risk, longevity risk
and salary risk. The risk relating to benefits to be paid to the dependents of plan members (widow and orphan benefits) is
re-insured by an external insurance company.
No other post-retirement benefits are provided to these employees.
The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out
at 31 December 2011 by Mr. F.G. Ho, Fellow of the Institute of Actuaries of A Land. The present value of the defined
benefit obligation, and the related current service cost and past service cost, were measured using the Projected Unit Credit
Method.
IAS 19.144
The principal assumptions used for the purposes of the actuarial valuations were as follows.
Discount rate(s)
Expected rate(s) of salary increase
Mortality table based on life expectancy trends of working population of
A Land (trends extrapolated until 2060)
Other [describe]
38
31/12/11
Valuation at
01/01/10 and
31/12/10
%
5.52
5.00
%
5.20
5.00
Source

Note:
IAS 19.120, 135
IAS 19.141
IAS 19.134, 135
The principal assumptions will depend on the nature of the benefit formula. If the formula is based on current
years salary with a conditional indexation of past service entitlements, the expected indexation will probably
be a significant assumption. Additional disclosure of the specific conditions on which this indexation depends
(e.g. sufficiency of plan assets) and/or how these indexations are funded, should be considered in light of the
objective of IAS 19.135a (as revised in 2011).
Amounts recognised in comprehensive income in respect of these defined benefit plans are as follows.
Year
ended
31/12/11
Year
ended
31/12/10
CU000
CU000
(restated)
Service cost:
Current service cost
Past service cost and (gain)/loss from settlements
Net interest expense
1,259
77
738
114
Components of defined benefit costs recorded in profit or loss
1,336
852
Remeasurement on the net defined benefit liability:

The return on plan assets (excluding amounts included in net interest expense)
Actuarial gains and losses arising from changes in demographic assumptions
Actuarial gains and losses arising from changes in financial assumptions
Other (describe)
Adjustments for restrictions on the defined benefit asset
(518)
(25)
(263)
(140)
(5)
(46)
Components of defined benefit costs recorded in OCI
(806)
(191)
Total of components of defined benefit cost
530
661
The past service cost, the service cost and the net-interest expense for the year is included in the employee benefits
expense in the consolidated [income statement/statement of comprehensive income]. The remeasurement on the net
defined benefit liability is included in the statement of comprehensive income as part of other comprehensive income.
Of the expense for the year, CU412,000 (2010: CU402,000) has been included in the consolidated income statement as
cost of sales.
IAS 19.140
IAS 19.140
The amount included in the consolidated statement of financial position arising from the entity's obligation in respect of its
defined benefit plans is as follows.
31/12/11
31/12/10
01/01/10
CU000
CU000
(restated)
CU000
(restated)
Present value of funded defined benefit obligation

Fair value of plan assets
6,156
(4,202)
5,808
(4,326)
6,204
(4,010)
Funded status
1,954
1,482
2,194
Restrictions on asset recognised
Other [describe]
1,954
1,482
2,194
Net liability arising from defined benefit obligation
39
Source

IAS 19.141
IAS 19.141
40
Movements in the present value of the defined benefit obligation in the current year were as follows.
Year
ended
31/12/11
Year
ended
31/12/10
CU000
CU000
Opening defined benefit obligation

Current service cost
Interest cost (restated)
Contributions from plan participants
Remeasurement (gains)/losses (restated):
Actuarial gains and losses arising from changes in demographic assumptions
Actuarial gains and losses arising from changes in financial assumptions
Other (describe)
Past service cost
Losses/(gains) on curtailments
Liabilities extinguished on settlements
Liabilities assumed in a business combination
Exchange differences on foreign plans
Benefits paid
Other [describe]
5,808
1,259
302
6,204
738
323
(25)
(263)
31
(956)
(5)
(46)
75
(1,481)
Closing defined benefit obligation
6,156
5,808
Year
ended
31/12/11
Year
ended
31/12/10
CU000
CU000
Opening fair value of plan assets

Interest income (restated)
Remeasurement gain (loss) (restated):
The return on plan assets (excluding amounts included in net interest expense)
Other (describe)
Exchange differences on foreign plans
Contributions from the employer
Contributions from plan participants
Benefits paid
Assets acquired in a business combination
Assets distributed on settlements
Other [describe]
4,326
225
4,010
209
518
89
(956)
140
1,448
(1,481)
Closing fair value of plan assets
4,202
4,326
Movements in the present value of the plan assets in the current year were as follows.
Source

IAS 19.142
The major categories of plan assets at the end of the reporting period for each category, are as follows.
31/12/11
31/12/10
Fair value of
plan assets
01/01/10
CU000
CU000
CU000
Cash and cash equivalents
50
Equity instruments
Consumer industry
Manufacturing industry
Energy and utilities
Financial institutions
Health and care
ICT and telecom
Equity instrument funds
300
310
416
280
300
406
310
290
302
Subtotal equity
1,026
986
902
Debt instruments
AAA
AA
A
BBB and lower
not rated
1,970
10
1,830
20
1,770
Subtotal debt instruments
1,980
1,850
1,770
300
800
96
200
1,000
290
250
1,000
28
1,196
1,490
1,278
Derivatives
Interest rate swaps
Forward foreign exchange contracts
10
Subtotal derivatives
Other [describe]
10
4,202
4,326
4,010
Property
Retail
Offices
Residential
Subtotal property
IAS 19.142
Virtually all equity and debt instruments have quoted prices in active markets. Derivatives can be classified as level 2
instruments and property as level 3 instruments based on the definitions in IFRS 13 Fair value measurement. It is the policy
of the fund to use interest rate swaps to hedge its exposure to interest rate risk. It is the policy of the fund to cover 30% of
the exposure to interest rate risk of the defined benefit obligation by the use of debt instruments in combination with
interest rate swaps. This policy has been realised during the reporting and preceding period. Foreign currency exposures are
fully hedged by the use of the forward foreign exchange contracts.
The actual return on plan assets was CU0.72 million (2010: CU0.354 million).
41
Source

IAS 19.143
The plan assets include ordinary shares of International GAAP Holdings Limited with a fair value of CU0.38 million
(31 December 2010: CU0.252 million) and property occupied by a subsidiary of International GAAP Holdings Limited with
a fair value of CU0.62 million (31 December 2010: CU0.62 million).
IAS 19.145
Significant actuarial assumptions for the determination of the defined obligation are discount rate, expected salary increase
and mortality. The sensitivity analyses below have been determined based on reasonably possible changes of the
assumptions occurring at the end of the reporting period.
If the discount rate would be 100 basis points (one percent) higher (lower), the defined benefit obligation would
decrease by CU 1,110 (increase by 1,154) if all other assumptions were held constant.
If the expected salary growth would increase (decrease) by 1%, the defined benefit obligation would increase by CU 120
(decrease by CU 122) if all other assumptions were held constant.
If the life expectancy would increase (decrease) with one year for both men and women, the defined benefit obligation
would increase by CU 150 (decrease by CU 156) if all other assumptions were held constant.
Note:
in accordance with IAS 19.173(b) (as revised in 2011) in financial statements for periods beginning before
1 January 2014, an entity need not present comparative information for the disclosures required by paragraph
145 about the sensitivity of the defined benefit obligation.
In reality one might expect interrelationships between the assumptions, especially between discount rate and expected
salary increases that both depends to a certain extent on expected inflation rates. The analysis above abstracts from these
interdependence between the assumptions.
IAS 19.146
Each year an ALM (Asset-Liability Matching)-study is performed in which the consequences of the strategic investment
policies are analysed in terms of risk-and-return profiles. Investment and contribution policies are integrated within this
study. Main strategic choices that are formulated in the actuarial and technical policy document of the Fund are:
Asset mix based on 25% equity instruments, 50% debt instruments and 25% investment property;
Interest rate sensitivity caused by the duration of the defined benefit obligation should be reduced with 30% by the use
of debt instruments in combination with interest rate swaps.
Maintaining an equity buffer that gives a 97.5% assurance that assets are sufficient within the next 12 months.
IAS 19.147
The Groups subsidiaries should fund the cost of the entitlements expected to be earned on a yearly basis. Employees pay
a fixed 5% percentage of pensionable salary. The residual contribution (including back service payments) is paid by the
entities of the Group. The funding requirements are based on a local actuarial measurement framework. In this framework
the discount rate is set on a risk free rate. Furthermore, premiums are determined on a current salary base. Additional
liabilities stemming from past service due to salary increases (back-service liabilities) should be paid immediately to the
Fund. Apart from paying the costs of the entitlements the Groups subsidiaries are not liable to pay additional contributions
in case the Fund does not hold sufficient assets. In that case Fund should take other measures to restore its solvency such
as a reduction of the entitlements of the plan members.
The average duration of the benefit obligation at the end of the reporting period is 16.5 years (2010: 15.6 years).
This number can be subdivided into the duration related to:
active members: 19.4 years (2010: 18.4 years);
deferred members: 22.6 years (2010: 21.5 years);
retired members: 9.3 years (2010: 8.5 years).
The Group expects to make a contribution of CU0.95 million (2010: CU0.91 million) to the defined benefit plans during the
next financial year.
42
Your IFRS contacts
Zurich
Martin Welser
Partner
Manufacturing & Consumer Business and
Life Science & Chemicals
044 421 62 53
mwelser@deloitte.ch
Daniel Flammer
Partner
Manufacturing & Consumer Business
044 421 20 66
dflammer@deloitte.ch
Rolf Schnauer
Partner
Financial Services Industry
044 421 63 18
rschoenauer@deloitte.ch
Oliver Kster
Director
044 421 61 23
okoester@deloitte.ch
Basel
Christophe Aebi
Senior Manager
058 279 9010
caebi@deloitte.ch
Geneva/Lausanne
Fabien Bryois
Director
022 747 17 49
fbryois@deloitte.ch
Alexandre Buga
Partner
Financial Services Industry
022 747 70 11
abuga@deloitte.ch
Michle Costafrolaz-Tissot
Partner
022 747 70 19
mcostafrolaz@deloitte.ch
Chris Jones
Partner
Energy & Resources
022 747 70 75
chrispjones@deloitte.ch
Lugano
Luciano Monga
Partner
091 913 74 38
imonga@deloitte.ch
43
Notes
44
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detailed description of the legal structure of DTTL and its member firms.
Deloitte SA is a subsidiary of Deloitte LLP, the United Kingdom member firm of DTTL.
Deloitte SA is recognised as auditor by the Federal Audit Oversight Authority and the Swiss Financial Market Supervisory Authority.
This publication has been written in general terms and therefore cannot be relied on to cover specific situations; application of the
principles set out will depend upon the particular circumstances involved and we recommend that you obtain professional advice
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2012 Deloitte SA. All rights reserved.
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IAS 19 Employee Benefits

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IAS 19 Employee Benefits

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June 2012

IAS 19 Employee benefits

Audit. Tax. Consulting. Corporate Finance.

3. The most important changes made by IAS 19R

4. Changes in IAS 19R with a significant impact expected in Switzerland

5. Other changes made by IAS 19R for which less impact is

6. Comparison of IAS 19R with IAS 19

Appendix I Disclosure requirements

Appendix II Comparison of IAS 19R with US GAAP

Appendix III Early application IAS 19 Employee Benefits

Your IFRS contacts

On 16 June 2011, the International

Extensive feedback on the discussion paper led to the

IAS 19R will be applicable for reporting

The expected return on plan assets under IAS 19

3. The most important changes made

In this chapter, the changes made by

Recognition of actuarial gains and losses

Balance sheet (in red based on IAS 19R)

An example of the impact of the first application of IAS

Introduction of net interest on the net defined

Defined benefit obligation

In the example above, the discount rate (4.0%) is lower

In addition, while IAS 19 permitted the treatment of

Not recognised in period

Actuarial gains or losses

As shown in the diagram opposite, the defined benefit

Service cost is recognised profit or loss and comprises:

Profit and loss

Net interest cost

Profit and loss

Current service cost.

Settlement gains and losses.

Examples of these more extensive disclosure

4. Changes in IAS 19R with a

Figure 1. What is the policy for recognising actuarial gains

The objective of this revised standard was to improve

These 19 companies, about two thirds, will need to

1 Deloitte IFRS Survey 2012

Figure 2. Elimination of the corridor method and

The users of the corridor approach are aware that the

> 5% and < 10%

b) Issued and effective for 2013 and after

Givaudan, Annual Report 2011

Swatch Group, Annual Report 2011

Change in the presentation approach and

This change may also cause an entity to become more

Figure 3. Estimated increase of the pension cost

With the rise of pension costs recognised in profit or

1 Deloitte IFRS Survey 2012

Inclusion of risk sharing elements in the

The present value of the future employee contributions

Liability (in red based on IAS 19R)

Present value of future employee

description of any other entitys responsibilities for

description of risks to which the plan exposes the

However, there are two exceptions to this retrospective

5. Other changes made by IAS 19R

This clarification might have important implications for

Short-term employee benefits are accounted for on an

IAS 19 states that termination benefits should be

6. Comparison of IAS 19R with IAS 19

Presentation of net defined

The net defined liability or asset reflects