Employee Future Benefits

Status: CICA Handbook – Accounting Section 3461, Employee Future Benefits, effective January 1, 2000. Additional guidance subsequently issued, including Q&A 98.2 (PDF)  in December 2004 to address the accounting implications of the Monsanto decision.

The AcSB issued CICA Handbook – Accounting Section 3461, Employee Future Benefits, in March 1999, with additional clarification provided in Accounting Handbook Releases No. 2 and No. 5, dated October 1999 and July 2000, respectively. In 2004, the AcSB amended this Section to improve and expand the disclosure requirements for employee future benefits (see Accounting Handbook Releases No. 28 and No. 30, dated March 2004 and September 2004, respectively). The amended disclosure requirements are effective for fiscal years ending on or after June 30, 2004.  For an overview of these disclosure enhancements, please see the Employee Future Benefits — Additional Disclosures project page under Completed Projects.

Section 3461 applies to fiscal years beginning on or after January 1, 2000, although earlier adoption is encouraged.

Accounting Implications of the Monsanto Decision

Ontario's Pension Benefits Act requires that plan participants affected by a partial wind-up of a defined benefit pension plan be granted the same entitlements as if the plan were completely wound up on the date of the partial wind-up.  In Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services), July 2004, the Supreme Court of Canada decided that the plan must pay out the actuarial surplus related to the portion of the plan being wound up. While this decision directly affects Ontario plans, it may also affect plans in other jurisdictions whose rules for partial wind-ups are similar to Ontario's rules.

Q&A 98.2 (PDF)  has been added to the Supplement to the Employee Future Benefits Implementation Guide to address the accounting implications of this decision.

Article Issued November 2002

Many pension plans have experienced losses due to the significant market downturn over the last three years.  This downturn may call into question an entity's discount rate and salary inflation assumptions and assumptions about the expected rate of return on plan assets. Issues regarding plan assumptions continue to garner media attention in Canada and the US, although, the Canadian experience on the use of these assumptions could be quite different than in the US and in some respects, more conservative.  In response, AcSB staff, in consultation with an ad-hoc group of accountants and actuaries knowledgeable in the area of employee benefits, has written an article entitled “Measurement Uncertainty and Employee Benefit Plans.”

Updates to Section 3461

October 1999's revisions to Section 3461 deal with circumstances that arise when an entity first applies Section 3461 on the prospective basis to an accrued benefit asset that is subject to the limit on its carrying amount.

July 2000's revisions eliminate possible U.S.-Canadian GAAP differences in the areas of attribution, settlements, disposal of a portion of a business segment, special termination benefits and multiemployer plans as well as make corresponding amendments to Appendices A and B.

Implementation Guidance — Supplement Now Available

The CICA published the Employee Future Benefits Implementation Guide (Guide) in 1999 as developed by a Working Group of volunteers from the accounting and actuarial professions. AcSB staff updated this Guide in September 2000 as a Supplement to the Employee Future Benefits Implementation Guide (Supplement). Q&A 89.1 (PDF) was added in November 2001 to deal with an issue relating to a change in the valuation allowance against the carrying amount of an accrued benefit asset. Q&A 98.2 (PDF)  was added in December 2004 to address the accounting implications of the Monsanto decision. Read in conjunction with each other, these publications are a valuable and practical resource both in the year of implementation of the new standard, as well as in subsequent years for ensuring continued compliance and consistent application. The back of the Supplement contains revised text of Section 3461 updated to reflect the above noted additional clarification guidance. To order a copy of the Supplement (Product #01650969) or the original Guide (#01650), please contact the CICA Customer Service Department at (416) 977-0748 or 1-800-268-3793 or www.cica.ca/Order. You may also wish to enquire about electronic versions.

EIC activities

In March 2003, the Emerging Issues Committee (EIC) issued EIC-134, “Accounting for Severance and Termination Benefits,” providing interpretive guidance to harmonize the accounting requirements for termination benefits in Section 3461 with US Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities (FAS 146). The EIC also issued EIC-135, “Accounting for Costs Associated with Exit and Disposal Activities (including Costs Incurred in a Restructuring”).

In April 2000, the EIC issued EIC-112, “CICA 3460 — Discount Rate Change for Pension Obligations prior to Adoption of CICA 3461,” relating to the transition to Section 3461. (See also Question 155.1 of the Supplement for more information.)  The EIC withdrew this Abstract on September 1, 2001.

CAmagazine Articles

The April 1999 issue of CAmagazine contains an article, “Accountable for your promises — new standards put an end to pay-as-you-go accounting for employee future benefits other than pensions,” that provides an overview of Section 3461 when it was introduced.

The June-July 2004 issue of CAmagazine contains an article, “Promises enlightened — new disclosure requirements for pensions and other employee future benefits address transparency concerns,” that discusses the enhanced disclosure requirements of Section 3461.


Staff support: Nancy Estey, CA
Phone no.: +1 (416) 204-3271.