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On The Horizon: Changes to UK benefit obligations

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On the Horizon newsletter Contents Current reporting issue

Changes to UK benefit obligations: UK High Court ruling affects UK-based pension plan accounting

FASB meets on Jan. 30 and ratifies EITF consensus SEC

Division of Investment Management posts guidance on updated forms

AICPA publishes Audit Risk Alert on governmental auditing developments GAO issues Professional Standards Update 72 International Federation of Accountants

IPSASB issues guidance on accounting for social benefits
Accounting for certain financial instruments amended
Proposal addresses accounting for collective and individual services and emergency relief



Current reporting issue Changes to UK benefit obligations: UK High Court ruling affects UK-based pension plan accounting Grant Thornton LLP has issued Snapshot 2019-02, which explains the impact of the 2018 UK High Court ruling on accounting for benefits provided under guaranteed minimum pension schemes.

FASB meets on Jan. 30 and ratifies EITF consensus All decisions reached at Board meetings are tentative and may be changed at future meetings.

The FASB met on Jan. 30 and ratified the Emerging Issue Task Force’s (EITF) consensus on Issue 18-B, “Improvements to Accounting for Episodic Television Series,” which the Task Force had reached at its Jan. 17 meeting.

The Board also discussed certain aspects of its project on distinguishing liabilities from equity but made no tentative decisions related to this project.

SEC Division of Investment Management posts guidance on updated forms The SEC’s Division of Investment Management recently posted Information Update IM-INFO-2019-01, “Website Updates to Forms N-1A, N-2, N-3, N-4, N-5, N-6, N-8B-2, N-14, and N-CSR,” to draw attention to recently updated forms for investment companies. Such updates were required to address final rules and amendments recently adopted by the Commission.

AICPA publishes Audit Risk Alert on governmental auditing developments The AICPA published Audit Risk Alert, Government Auditing Standards and Single Audit Developments – 2018/19. This alert provides an overview of regulatory activities, industry developments and trends, technical and professional developments, and future or emerging issues.

GAO issues Professional Standards Update 72 The Government Accountability Office (GAO) published “Professional Standards Update (PSU) 72,” which highlights the issuance and some key points of standards published from October through December 2018.

This PSU includes the 2018 revisions to Generally Accepted Government Auditing Standards (also known as the “Yellow Book”), which superseded the 2011 revision. The 2018 Yellow Book is effective for financial statement audits, attestation engagements and reviews of financial statements for periods ending on or after June 30, 2020, and for performance audits beginning on or after July 1, 2019. Early implementation is not permitted.

International Federation of Accountants IPSASB issues guidance on accounting for social benefits The International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) issued IPSAS 42, Social Benefits, to address the accounting for social benefits provided by governments ― such as retirement, unemployment and disability benefits ― and to promote consistency and comparability in how social benefit schemes are reported by public sector entities. Social benefit arrangements typically account for a significant portion of a government’s expenditures, but existing standards do not provide guidance on how to account for social benefits.

IPSAS 42 defines social benefits and includes requirements for recognizing and measuring social benefit schemes. It also includes disclosure requirements that will provide additional information for financial statement users to evaluate the effect of social benefits on a government’s finances.

IPSAS 42 is effective for annual periods beginning on or after Jan. 1, 2022. Early adoption is permitted.

Accounting for certain financial instruments amended The IPSASB issued Long-term Interests in Associates and Joint Ventures (Amendments to IPSAS 36) and Prepayment Features with Negative Compensation (Amendments to IPSAS 41), which amends the existing guidance that public sector entities apply when accounting for certain financial instruments.

The amendments converge existing guidance in IPSAS with the narrow-scope amendments to International Accounting Standard (IAS) 28, Investments in Associates and Joint Ventures, made by the International Accounting Standards Board (IASB) that are contained in Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28), issued in 2017. The amendments clarify that the guidance in IPSAS 41, Financial Instruments, including its impairment requirements, applies to long-term interests in associates and joint ventures.

The amendments also converge existing guidance in IPSAS with the narrow-scope amendments to International Financial Reporting Standard (IFRS) 9, Financial Instruments, made by the IASB in Prepayment Features with Negative Compensation (Amendments to IFRS 9) in 2017. The amendments revise the classification requirements so that certain financial assets with prepayment features that may result in reasonable negative compensation for the early termination of a contract may be measured either at amortized cost or at fair value through net assets or equity.

The amendments are effective for annual periods beginning on or after Jan. 1, 2022. Early adoption is permitted.

Proposal addresses accounting for collective and individual services and emergency relief The IPSASB released for comment Exposure Draft 67, Collective and Individual Services and Emergency Relief (Amendments to IPSAS 19), which would include separate guidance on accounting for collective and individual services, along with emergency relief, in IPSAS 19, Provisions, Contingent Liabilities and Contingent Assets. These service and relief nonexchange transactions are excluded from the definition of social benefits under IPSAS 42, as discussed above.

The proposed amendments define the terms “collective services” and “individual services,” and provide guidance for a public sector entity when determining whether both these services ― as well as emergency relief (delivered in response to specific emergencies or as an ongoing activity) that it provides ― are within the scope of the proposed guidance.

Under the proposal, public sector entities would not be required to recognize a provision for collective services or individual services within the scope of the proposed guidance before delivering these services. Public sector entities would follow this same proposed guidance for emergency relief delivered as an ongoing activity if this relief is analogous to delivering collective services or individual services. For emergency relief in response to specific emergencies, public sector entities would be required to determine if a present obligation is created by an explicit policy decision, including subsequent announcements or actions, which would require recognizing a provision if the obligation meets certain criteria under IPSAS 19. When these events do not give rise to a present obligation under IPSAS 19, public sector entities would consider whether other guidance within IPSAS 19 might require disclosure of a contingent liability.

Comments on the proposal are due by May 31.


© 2019 Grant Thornton LLP, U.S. member firm of Grant Thornton International Ltd. All rights reserved. This Grant Thornton LLP On the Horizon provides information and comments on current accounting and SEC reporting issues and developments. It is not a comprehensive analysis of the subject matter covered and is not intended to provide accounting or other advice or guidance with respect to the matters addressed in this publication. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this publication. For additional information on topics covered in this publication, contact a Grant Thornton client-service partner.