The Financial Reporting Standards Council has approved the issuance of Philippine Interpretation IFRIC–14, PAS 19—The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. IFRIC Interpretation 14 was originally issued by the International Financial Reporting Interpretations Committee (IFRIC), the interpretative arm of the International Accounting Standards Board (IASB).

The Interpretation provides general guidance on how to assess the limit in PAS 19, Employee Benefits, on the amount of the surplus that can be recognized as an asset. It also explains how the pension asset or liability may be affected when there is a statutory or contractual minimum funding requirement. The Interpretation will standardize practice and ensure that entities recognize an asset in relation to a surplus on a consistent basis.

No additional liability need be recognized by the employer under the Interpretation unless the contributions that are payable under the minimum funding requirement cannot be returned to the company. The Interpretation is likely to have the most impact in cases where there is a minimum funding requirement and where there are restrictions on a company’s ability to get refunds or reduce contributions.

The Interpretation is mandatory for annual periods beginning on or after January 1, 2008. Earlier application is permitted.

The Interpretation will be forwarded to the Board of Accountancy and Professional Regulation Commission for approval.