Question

In June of 2011, the IASB amended IAS 19, Employee Benefits, changing its method of accounting for pensions. What was the purpose of this amendment?

1) To align the accounting for pensions under U.S. GAAP and IFRS
2) To simplify the accounting for pensions
3) To increase transparency in pension accounting
4) To reduce the financial burden on companies

Answer 1

The purpose of the June 2011 amendment to IAS 19, Employee Benefits, was to increase transparency in pension accounting.

Step-by-step explanation:

The amendment to IAS 19 in June 2011 aimed to enhance transparency in the accounting for pensions. The International Accounting Standards Board (IASB) recognized the importance of providing stakeholders with clearer insights into a company's pension obligations and related financial implications.

The amendment introduced changes to the method of accounting for pensions, requiring companies to disclose more detailed information about their pension plans in their financial statements.

By enhancing transparency, the IASB sought to enable investors, analysts, and other users of financial statements to make more informed decisions.

The amendment addressed concerns about the complexity and lack of clarity in pension accounting, providing a more accurate representation of a company's pension-related financial position.

This move towards increased transparency was aligned with the broader global effort to improve financial reporting standards and facilitate comparability across different jurisdictions.

While alignment with U.S. Generally Accepted Accounting Principles (GAAP) was not the primary focus of this specific amendment, the pursuit of transparency indirectly contributes to aligning accounting practices globally.

Ultimately, the goal was to provide stakeholders with a clearer understanding of a company's pension commitments, fostering trust and facilitating better decision-making in the financial markets.