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ACCA Strategic Professional · Strategic Business Reporting (International) · Employee benefits

Zeta Co operates a defined benefit plan. Its finance director proposes to omit the sensitivity analysis of the defined benefit obligation to changes in significant actuarial assumptions, arguing that the figures are volatile and might worry investors. Under IAS 19 Employee Benefits, which statement is correct?

The omission is unacceptable. IAS 19 requires a sensitivity analysis of the defined benefit obligation for significant actuarial assumptions, so leaving it out merely to avoid worrying investors breaches the standard and the ethical duty of integrity, and no materiality or on-request exemption applies.

  1. AThe omission is acceptable because sensitivity analysis is voluntary under IAS 19
  2. BThe omission is acceptable if the plan deficit is below 5% of total equity
  3. CThe omission is unacceptable because IAS 19 requires disclosure of a sensitivity analysis for significant actuarial assumptions, and withholding it for presentational reasons is an ethical concernCorrect
  4. DThe omission is acceptable if the actuary's report is available to shareholders on request

Explanation

IAS 19 requires disclosure of a sensitivity analysis for significant actuarial assumptions, with methods and assumptions used. Omitting required information to avoid investor concern is a lack of integrity and objectivity. There is no 5% threshold exemption, and availability of an actuary report on request does not replace the required note.

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