The Accounting Standards Council approved the following amendments to Philippine Accounting Standard (PAS) 39, Financial Instruments: Recognition and Measurement and PAS 19, Employee Benefits.

Amendment to PAS 39, Financial Instruments: Recognition and Measurement – Transition and Initial Recognition of Financial Assets and Financial Liabilities.

The amendment provides transitional relief from retrospective application of the ‘day 1’ gain and loss recognition requirements by allowing entities to adopt a transition option that is easier to implement than that in the previous version of PAS 39. It gives entities a choice of applying the ‘day 1’ gain or loss recognition requirements in PAS 39:
(a) retrospectively (as currently required by PAS 39);
(b) prospectively to transactions entered into after 25 October 25, 2002; or
(c) prospectively to transactions entered into after January 1, 2004.

Effective date: Annual periods beginning on or after January 1, 2005.

Amendment to PAS 19, Employee Benefits – Actuarial Gains and Losses, Group Plans and Disclosures

Actuarial gains and losses. The amendment permits an additional option of recognizing actuarial gains and losses in full in the period in which they occur, outside profit or loss, in a statement of recognized income and expense (similar to the U.K. requirement). PAS 19 currently requires actuarial gains and losses to be recognized in profit or loss either (a) immediately in the period in which they occur, or (b) on a deferred basis (i.e., spread forward over the service lives of the employees, similar to U.S. GAAP).

Group plans. The amendment requires a group entity that participates in a defined benefit plan that shares risks between entities under common control (i.e., a parent and subsidiaries) to obtain information about the plan as a whole measured in accordance with PAS 19. If there is a contractual agreement or policy for charging the cost for the plan as a whole to individual group entities, the group entity, in its separate or individual financial statements, will recognize the cost so charged. If there is no such agreement or policy, the cost will be recognized in the separate or individual financial statements of the group entity that is legally the sponsoring employer for the plan. The other group entities will, in their separate or individual financial statements, recognize a cost equal to their contribution payable for the period.

Additional disclosures. The amendment requires additional disclosures (a) about trends in the assets and liabilities in a defined benefit plan and the assumptions underlying the components of the defined benefit cost; and (b) that bring the disclosures in PAS 19 closer to those required by U.S. SFAS 132, Employers’ Disclosures about Pensions and Other
Postretirement Benefits.

Effective date: Amendment on actuarial gains and losses – annual periods ending on or after December 16, 2004, or annual periods beginning on or after January 1, 2006. Amendments on group plans and additional disclosures – annual periods beginning on or after January 1, 2006.