Prepayments of a minimum funding requirement: proposed amendments to IFRIC 14

Comments from ACCA to the International Accounting Standards Board, July 2009. ACCA is pleased to have this opportunity to comment on the exposure draft (ED) on the above subject which has been considered by ACCA's Financial Reporting Committee.

We agree with the proposed amendments, which address the unintended consequences for the accounting treatment of prepayments of minimum funding requirement contributions relating to future service, arising from IFRIC14. It is clear that where an entity does make such contributions which exceed future service costs, the entity will derive future economic benefit and should be accounted for as an asset, rather than expensed, as is the case under IFRIC14 currently.

However, we would question how necessary it is to resolve such an issue through an exposure draft. While the current requirements do appear anomalous, we believe that under a principled approach with the use professional judgement, entities and their auditors should still arrive at the proposed accounting treatment by applying the true and fair override within IFRS.

As we have consistently stated in our correspondences with the Board, we believe that amendments to IFRS should be kept to a minimum, and only where constituents have evidenced that the current requirements need significant improvement. Otherwise the costs of having to reassess the impact of new requirements often outweigh the perceived benefits.

Last updated: 12 Apr 2012