AcSB

Pension Plan Advisory Committee Notes – October 28, 2024

The Pension Plan Advisory Committee assists the Accounting Standards Board (AcSB) with maintaining and improving accounting standards for pension plans in Part IV of the CPA Canada Handbook – Accounting and with identifying the need for non-authoritative guidance about the standards. The Committee makes recommendations to the AcSB but is not authorized to interpret or provide authoritative guidance on accounting standards for pension plans.

The AcSB staff have prepared this document based on discussions held during the Committee’s meeting. The meeting notes do not necessarily represent the AcSB’s views and nothing in them constitutes authoritative guidance on acceptable or unacceptable application of accounting standards for pension plans. Only the AcSB can make such a determination.

In April 2024, the former Pension Plan Working Group transitioned to become an advisory committee called the Pension Plan Advisory Committee. Advisory committees have indefinite lifespans and regular standing meetings every year, whereas working groups meet as needed based on projects under way. As part of this transition, the Committee will begin posting meeting notes. Below are the meeting notes from its first meeting following the transition.

Part IV Priorities

The Pension Plan Advisory Committee discussed potential future projects that the AcSB could take on in Part IV of the Handbook, following completion of the current project on Improvements to Presentation and Disclosure of Investments for Pension Plans in mid-2025. At its September 2024 meeting, the AcSB discussed that it would consider a project on accounting by pension plans that have a combination of defined benefit and defined contribution features, along with other benefit plans. The Committee discussed that if such a project were considered, it would be important to start by getting an understanding of the different plan types across Canada. The Committee also shared thoughts on other potential projects the Board could take on.

Improvements to Presentation and Disclosure of Investments for Pension Plans

The Pension Plan Advisory Committee discussed feedback on the AcSB’s Exposure Draft, “Improvements to Presentation and Disclosure of Investments for Pension Plans,” and potential solutions to address key issues raised through the AcSB’s outreach activities.

Disclosure of interests in investment vehicles

Many respondents to the Exposure Draft agreed with improving transparency on a pension plan’s interests in investment vehicles through disclosure. However, some respondents thought the term “investment vehicles” should be defined and the disclosure expectation should be clarified. The Committee discussed possible ways the description of “investment vehicles” could be enhanced and ways to assist pension plans in applying judgment about the level of detail to disclose. The Committee also discussed that the AcSB could add guidance on how to meet the disclosure objective of enabling users to evaluate the nature of, and changes in, the risks associated with a pension plan’s interests in investment vehicles.

Presentation and disclosure of investment expenses

Respondents agreed with the proposals to add a definition of “investment expenses” and disclosure requirements for investment expenses. The Committee discussed feedback from respondents on the proposed definition of “investment expenses” and the proposed disclosure requirements for investment expenses. The Committee considered options to clarify the nature of directly attributable internal investment management costs included in investment expenses. The Committee also discussed adding a definition of “embedded investment expenses” to Section 4600, Pension Plans.

Fair value disclosures

Most respondents to the Exposure Draft agreed with the proposal to require pension plans to provide disclosures in accordance with IFRS 13 Fair Value Measurement. Some respondents had comments about the impact on small pension plans and how future IFRS 13 amendments would be evaluated. The Committee discussed that the AcSB could clarify how the disclosure requirements may be met by small (or large) pension plans that rely on third-party valuations for fair value measurements. The Committee also discussed the Board’s due process for assessing the applicability of future IFRS 13 amendments to pension plans and how the pension sector would be consulted.

Effective date and transition

The Committee considered feedback from respondents requesting a later effective date of January 1, 2027. Respondents suggested that additional time was needed specifically to prepare disclosures in accordance with IFRS 13. The Committee also considered whether additional transitional relief would be necessary to apply the amendments.

The AcSB will deliberate the Exposure Draft feedback and consider input from the Committee at the November 2024 Board meeting.

Application Question

The Committee discussed an application question regarding the disclosure of accounting policies by pension plans in accordance with Accounting Standards for Pension Plans in Part IV of the Handbook.

Currently, Section 4600, Pension Plans, requires a pension plan to select accounting policies consistent with IFRS® Accounting Standards or Accounting Standards for Private Enterprises for items that do not relate to its investment portfolio or pension obligation. Section 4600 also requires disclosure of significant accounting policies used in preparing the financial statements in paragraph 4600.29(b); whereas IFRS Accounting Standards require entities to disclose their “material accounting policy information”.

The question raised is, when a pension plan selects IFRS Accounting Standards as the underlying framework, should it use “significant” accounting policies as mentioned in Section 4600 or “material” accounting policies as required in IFRS Accounting Standards?

The Committee discussed whether there is diversity in practice and whether a pension plan’s assessment of significant or material accounting policy information would affect the information provided to users of financial statements and/or their decisions.

Committee members noted that some pension plans are disclosing “significant” accounting policies and others have updated their financial statements to disclose “material” accounting policy information. For the plans that are disclosing “material” accounting policy information, they have not observed a change in the policy information disclosed.

The Committee also noted that some pension plans are disclosing historical policy information that may not be material to all users; however, they prefer to include it as some users may find this additional information useful.

The AcSB will consider the Committee’s feedback at a future meeting.

Strategic Research – Evaluating the Preface

The Committee discussed the AcSB’s strategic initiative to evaluate the Preface to the Handbook and whether the Preface is directing small health and wellness funds to the most suitable framework to meet their reporting needs.

The Committee advised that for small health and wellness funds that are acting as intermediaries and not holding assets in a fiduciary capacity, further research may be needed to assess whether Part IV of the Handbook is meeting the financial reporting needs. The Committee advised that this may not be limited to small health and wellness funds and therefore any research should be broader to include other types of plans as well.

The AcSB will consider the Committee’s feedback at its meeting in February 2025.