Document ID: chunk:federal_register_of_legislation:F2024L00075:reg:38:p47
Version: federal_register_of_legislation:F2024L00075
Segment Type: reg
Provision Reference: reg 38 (pt 47/76)
Character Range: 165655–168704

(a)                   there are no compelling reasons to depart from current practice under AAS 25 and AASB 119, which ensures accrued benefits are measured on the basis of future benefit payments that members are likely to receive;
(b)                   in the Australian context, some higher of benefit options can change depending upon various factors, including investment returns, salary increases, and members' ages and service periods, and a reliable measurement is not feasible; and
(c)                   using an option valuation technique is not justified on cost-benefit grounds, particularly since the separate recognition of a higher of benefit option could potentially confuse some users.
BC137        Based on the feedback received on ED 179 and the lack of progress at the IASB on its post-employment benefits work, the AASB concluded that neither ED 223 nor AASB 1056 should address higher of benefit options.

Employer-sponsor receivables
BC138        Neither ED 179 nor ED 223 included explicit recognition or measurement proposals about receivables from an employer-sponsor where there is a net difference between the assets and liabilities of a defined benefit plan.  Both exposure drafts proposed disclosure of the main features of any specific contractual arrangement in place between the trustee and the relevant employer-sponsor in relation to funding a 'deficit'.  Both also mentioned in their Bases for Conclusions that, unless there is a specific contractual arrangement between the entity and employer-sponsor, the deficit would not in itself give rise to a receivable controlled by the entity.
BC139        Respondents to ED 179 and ED 223 confirmed the AASB's thinking that specific contractual arrangements between the entity and employer-sponsor are rarely, if ever, encountered.  However, the AASB's targeted outreach with public sector superannuation entities revealed that legislative guarantees of funding are relatively common in that sector.  In addition, some respondents sought guidance on the circumstances in which a plan would recognise contributions receivable in respect of defined benefit members for which there is a deficit of net assets.
BC140        The AASB concluded that AASB 1056 should include a requirement to recognise a receivable from an employer-sponsor to the extent that it meets the definition and recognition criteria for an asset in the Framework.
BC141        The AASB considered the various approaches that could be taken to measuring such a receivable and concluded that it should be measured on a basis consistent with the measurement principle for the underlying defined benefit member liability less the fair value of any assets held by the entity to meet that liability, which is effectively the 'intrinsic value' of the asset.  The AASB concluded that any other measurement principle for an employer-sponsor receivable in respect of defined benefit member liabilities would be likely to involve taking into account employer-sponsor credit risk, which would not be appropriate