| Social benefits – what information should be provided to users of financial statements? |
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The Accounting Standards Board approved an Exposure Draft on Social Benefits (ED 205) at its July 2023 meeting. Previous articles explained the Board’s proposals to define, recognise and measure social benefits in the scope of the ED. In-kind social benefits are outside the scope of the ED; the Board will consider guidance on these benefits in a future project.
Arguably the most important question a standard-setter should answer in developing a standard is “what information do users need about this transaction or event to hold entities accountable and make decisions”? The Board often asked this question when it developed the definition, recognition and measurement requirements. This was also the core question considered in developing the disclosure requirements for the ED. The disclosure requirements ensure the needed information is provided to users – through numbers and narrative.Risks and uncertaintiesThe Board identified that a key part of information about social benefits that should be provided in the financial statements relates to an entity’s present obligations to provide social benefits to beneficiaries. As a result of the recognition and measurement requirements for social benefit liabilities, entities will use estimates to provide the required information in the financial statements. When an entity uses estimates in lieu of precise information, there are inherently more risks and uncertainties that need to be considered.
The ED proposes that a user would need information about the risks and uncertainties that affect measurement to enable them to use the information. A part of using information to hold entities accountable and make decisions is that a user should be able to compare information between entities, and from one year to the next. Information on risks and uncertainties allows a user to make these comparisons.Sensitivity analysisSome standards that require complex measurement of liabilities, often with the use of actuaries, require entities to disclose information that will enable a user to understand how sensitive a liability is to changes in certain estimates. For example, IFRS 17 on Insurance Contracts and GRAP 25 on Employee Benefits. The ED does not require a sensitivity analysis of social benefit liabilities. The Board considered whether this information may be useful, particularly for social security insurance benefits, and concluded this would be unnecessary.Provide your comment on the proposalsAccess ED 205 on Social Benefits on the ASB website. Comment is due by 17 November 2023. Contact elizna@asb.co.za for more information. |
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