IFRIC 14 IAS 19—The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

IFRIC 14 interprets the LIMIT on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction.

IFRIC 14 Effective Date

An entity shall apply this Interpretation for annual periods beginning on or after 1 January 2008.

Earlier application is ‘PERMITTED’.

IFRIC 14 – Scope

This Interpretation applies to all post‑employment defined benefits and other long‑term employee defined benefits.

IFRIC 14 – Background

IAS 19 limits the Measurement of a net defined benefit asset to the LOWER of:

However, IAS 19 does NOT give guidance on when refunds or reductions in future contributions should be regarded as available, particularly when a ‘Minimum Funding Requirement’ exists.


Minimum Funding Requirement

The LAW in a Jurisdiction Might result in aMinimum Funding Requirement‘. This is a Requirement for Co. to Make contributions to fund a defined benefit plan.

The existence:

  • Might RESTRICT the economic benefits available as a reduction in future contributions;
  • May give rise to liability if the contributions required will NOT be available to the entity once they have been paid (EITHER as refund or reduction in future contributions).

1. Impact of Minimum Funding Requirement and Future Benefits Available in the Form of Refunds

(a) It Might result in cash being owed to a plan.
(b) Whether a liability should be RECOGNIZED depends on the recover-ability of the amounts that are to be paid.
(c) A liability is recognized for any amount NOT available after they are paid into the plan.
The liability would:
Reduce the net defined benefit asset; OR
Increase the net defined benefit liability.

Leave a Comment