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On 25 March 2021, the International Accounting Standards Board (IASB) published Exposure Draft ED/2021/3 Disclosure Requirements in IFRS Standards – A Pilot Approach (Proposed amendments to IFRS 13 and IAS 19). The Exposure Draft proposes guidance for the IASB’s own use when developing and drafting disclosure requirements in IFRS Standards in future. It also includes amendments to IFRS 13 Fair Value Measurement and IAS 19 Employee Benefits in line with the proposed new approach.

The Exposure Draft is part of the IASB’s Disclosure Initiative, seeking to address the “disclosure problem”: financial statements that do not contain enough relevant information, contain to much irrelevant information, and do not communicate the information provided effectively.

Proposed amendments to IAS 19

The current version of IAS 19 includes a long list of required disclosure items, particularly for defined benefit (DB) plans. This has to an extent encouraged a checklist approach when preparing pension disclosures. The IASB is seeking to change this.

Under the proposed amendments the list of mandatory disclosure items is cut back and replaced with a combination of overall and specific disclosure objectives. To help companies meet the disclosure objectives, the standard also contains suggested (non-mandatory) items and examples.

With disclosure objectives replacing many prescribed items, companies will need to revise the pension notes in their financial reports if the changes are adopted.

Examples of new disclosures for DB plans, responding to investor information needs identified by the IASB, are:

  • Clear identification of the how the amounts in the pension note relate to the entries in the balance sheet, income statement and cash flow statement for the reporting period, allowing the users of the financial statements reconcile the information easily and identify the amounts to include in their analyses.
  • Additional information on the effect of the DB plans on the company’s future cash flows. For example, projections of the company contribution amounts expected to be paid to funded DB plans (or benefit payments due from the company in respect of unfunded plans) in future years – currently only contributions for the following year are required to be disclosed.

The current requirement under IAS 19 for DB plans to illustrate the sensitivity of the Defined Benefit Obligation to changes in the key assumptions would no longer be mandatory under the proposed new disclosure requirements.

The disclosures for defined contribution (DC) plans are unlikely to be significantly affected. However, new disclosure objectives are introduced for other types of long-term employee benefits and termination benefits. Companies will need to disclose information that enables the users of the financial statements to understand the nature of those benefits, and the effect they have on the company’s financial position, financial performance, and cash flows.

The proposed amendments will require companies to exercise judgement about what to disclose. This will mean greater input from senior management – both initially in implementation and on an ongoing basis to capture changes in the business and in the needs of the users of the company’s financial reports. The IASB acknowledges that there will be costs to companies in implementing the proposed changes in their reporting, but also anticipates some savings as the changes should help entities eliminate irrelevant information from their disclosures.

Having mainly objectives-based disclosures will also call for greater judgement on the part of auditors when deciding whether companies meet the proposed new disclosure requirements. How auditors respond to this new disclosure approach will be a key factor in determining whether the proposed changes can bring us closer to solving the “disclosure problem”, with regular challenges on the continuing appropriateness of companies’ disclosure notes, or whether we will settle into a new set of standardised pension notes.

The Exposure Draft does not include a proposed effective date. Based on the consultation timeline we would not expect the proposed changes to take effect before 2023.

Next steps

The IASB asks for comments on the draft guidance and proposed changes by 21 October 2021. Feedback from the IASB on the Exposure Draft consultation is expected in the first half of 2022.

If the IASB decides to proceed with the proposed guidance, it will finalise the amendments to IFRS 13 and IAS 19 based on the feedback received. It will then also propose amendments to other standards.


Isabel Coles

Head of International Consulting, MBWL International



Isabel Coles

Head of International Consulting, MBWL International