IPSASB plans multi-employer retirement plan accounting changes

The International Public Sector Accounting Standards Board released for public comment an exposure draft of a proposed standard for multi-employer retirement plan obligations.

The goal is to increase the transparency and accountability of public sector entities when it comes to the measurement and recognition of retirement plan obligations, which can represent a significant liability for the public sector and is often omitted from the financial statements of a consolidated entity. The IPSASB decided it was important to develop an international standard to fill this gap and require retirement plans to provide a complete picture of public sector retirement obligations.

While multi-employer retirement plans might seem to be more common in the private sector, public sector labor unions often strike bargains with a variety of state and local governments. In the U.S., the Governmental Accounting Standards Board already has set standards for pension plans for state and local governments in GASB Statement No. 68 in June 2012. The IPSASB is affiliated with the International Federation of Accountants and is more concerned with global accounting standards. Its exposure draft uses the International Accounting Standards Board’s IAS 26, “Accounting and Reporting by Retirement Benefit Plans,” as a starting point.

“Retirement benefit obligations can represent a significant but often hidden liability for the public sector,” said IPSASB chair Ian Carruthers in a statement Friday. “The draft standard requires public sector employee retirement benefit plans to provide a complete view of their financial activities, assets and obligations. This increased transparency is intended to result in stronger public financial management and better-informed decision making.”

An IPSASB web page includes the exposure draft, an at-a-glance summary, a video explainer and a way to submit comments. The IPSASB is asking for comments on the exposure draft by Aug. 1, 2022.