PSAK 24 (Revised 2010) has arrived!
The Indonesian Institute of Accountants (Ikatan Akuntan Indonesia – IAI) recently issued the revised
version of Pernyataan Standar Akuntansi Keuangan No. 24, the PSAK 24 (Revised 2010) or PSAK 24
(2010) as a part of the grand plan for convergence to International Financial Reporting Standard or
IFRS. PSAK 24 (2010) adopts the 1 January 2009 version of IFRS’s International Accounting
Standard No. 19 or IAS 19.
This short article highlights some of the important differences between PSAK 24 (2010) and its
predecessor PSAK 24 (Revised 2004) or PSAK 24 (2004) concerning benefits covered, recognition of
liability, expense components, recognition of actuarial gain or loss and disclosure requirements.
Later on it discusses what this revised PSAK 24 means to reporting entities, what we should do and
what we can expect in the near future.
Benefit coverage
PSAK 24 (2010)
a. Short-term employee benefits
b. Post-employee benefits (defined benefit
(DB) and defined contribution (DC))
c. Other long-term employee benefits
d. Termination benefit
PSAK 24 (2004)
a. Short-term employee benefits
b. Post-employee benefits (defined benefit
(DB) and defined contribution (DC))
c. Other long-term employee benefits
d. Termination benefit
e. Equity-based compensation
Remarks:
Except for the fact that equity-based compensation is no longer covered by PSAK-24 (it is covered by
PSAK 53 (2010)), there are no changes in the benefit coverage.
Comparisons below are specifically for DB post-employment benefits which require more complex
accounting processes.
Recognition of liability
PSAK 24 (2010)
PSAK 24 (2004)
Present Value of Defined Benefit Obligations
(PVDBO)
Plus / less
Actuarial gain / loss
Less
Past service cost
Less
Fair value of plan asset
Present Value of Obligations
Plus / less
Actuarial gain / loss
Less
Past service cost
Less
Fair value of plan asset
Remarks:
There is no difference in how liability is determined.
www.dayamandiri.co.id PSAK 24 (Revised 2010) 1 Expense components
PSAK 24 (2010)
PSAK 24 (2004)
Current service cost
Current service cost
Interest cost
Interest cost
Expected return on plan asset and
reimbursement rights
Expected return on plan asset and
reimbursement rights
Actuarial (gain) or loss
Actuarial (gain) or loss
Past service cost
Past service cost
Effect of curtailment and settlement
Effect of curtailment and settlement
Effect of any asset limitation
Remarks:
PSAK 24 (2010) requires explicit recognition in statement of profit or loss of the effect of any asset
limitation.
Options for recognition of actuarial gain or loss
PSAK 24 (2010)
a. Amortization using 10% corridor
b. Amortization using other systematic
methods that result in faster recognition
than the 10% corridor method
c. Immediate in statement of profit or loss
d. Immediate outside statement of profit or
loss (in other comprehensive income or
OCI)
PSAK 24 (2004)
a. Amortization using 10% corridor
b. Amortization using other systematic
methods that result in faster recognition
than the 10% corridor method
c. Immediate in statement of profit or loss
Remarks:
PSAK24 (2010) opens the possibility to recognize actuarial gain or loss in full without affecting the
current period’s financial performance of an entity.
Disclosures
PSAK 24 (2010)
PSAK 24 (2004)
Additional disclosures required under PSAK 24
(2010) are:
Requires disclosures on:
a. Reconciliation of opening and closing
balances of PVDBO
b. Analysis of obligation into amounts from
wholly unfunded plan and from wholly or
partially funded plan
c. Reconciliation of opening and closing
balances of fair value of plan assets and
any reimbursement rights
d. Total amount recognized in OCI
a.
e. Cumulative amount of any actuarial gain
or loss recognized in OCI
f. Percentage amount of plan asset by
e.
www.dayamandiri.co.id b.
Accounting policy for recognizing
actuarial gain/loss
General description of the type of plan
c.
Reconciliation of liability or asset
recognized in balance sheet
d.
Amounts of plan assets in the form of
financial instruments issued by entity and
property occupied by, or other assets
used by the entity
Reconciliation of the movement of liability
or asset during the period
Expense recognized in statement of profit
f.
PSAK 24 (Revised 2010) 2 asset class (equity, debt, property, etc)
g. Narrative description of the basis used to
determine the expected return on plan
assets
h. Effect of increase and decrease of one
percentage point of medical cost trend
rates
i. Amounts for current annual period and
previous four annual periods of PVDBO,
plan assets, surplus and deficit of plan,
as well as experience adjustments
j.
g.
or loss
Actual return on plan asset and on
reimbursement rights
h.
Actuarial assumptions
Employer’s estimate of contribution in the
subsequent annual period
Remarks:
PSAK 24 (2010) requires more extensive disclosures.
Effective date
PSAK 24 (2010) is to be applied for reporting periods beginning on or after 1 January 2012.
Transitional provision
If entity opts to recognize actuarial gain or loss immediately in OCI, the remaining balance of
unrecognized actuarial gain or loss is adjusted immediately in OCI.
Disclosures requirement is to be applied retrospectively, except for the last two items in the previous
comparison table under PSAK 24 (2010) (the letters (i) and (j)), which are applied prospectively.
What does this mean?
All entities reporting under PSAK 24 (2010) will be required to disclose a more extensive set of
information regarding its liability or asset relating to employee benefits scheme. Users of the financial
statements will therefore be better equipped to assess risks associated with and the profile of the
employee benefits scheme that give rise to the liability (or asset) recognized by the reporting entity.
Another consequence of the revision of PSAK 24 is that it will eliminate the confusions surrounding
recognition of actuarial gain or loss outside the statement of profit or loss. This is particularly true for
entities that consolidate to IFRS reporting that adopts the OCI method for recognition of actuarial gain
or loss. Otherwise, the OCI method opens up possibility for other entities, which do not necessarily
need to consolidate to IFRS reporting, to recognize actuarial gain or loss immediately without
affecting its current period’s performance.
Although some consequences may be common for all reporting entities, others may be different for
different entities depending on the specific situations of each entity.
What to do now?
Entities need to gain a comprehensive understanding of PSAK 24 (2010) and how it compares to
PSAK 24 (2004). With thorough understanding, entities can then identify employee benefits schemes
and anticipate efforts and preparation required for a successful implementation of PSAK 24 (2010). In
many cases, it will help to talk to the public accountant and the actuarial consultant to discuss any
questions or concerns. Entities reporting for consolidation under IFRS may also need to discuss with
its overseas counterpart.
www.dayamandiri.co.id PSAK 24 (Revised 2010) 3 What to expect in the near future?
IAS 19 is currently in the process of being revised. If things go as planned, IAS 19 Revised 2010 will
be in place in the near future for adoption in the period beginning on or after 1 January 2013. PSAK
24 will consequently take on another revision to keep up with changes in IFRS. Proposed revisions to
IAS 19 are an interesting set of topics and will be discussed in the next Dayamandiri publication.
Final thoughts
Thorough understanding of PSAK 24 (2010) and how it impacts the financial performance is a crucial
first-step for its successful implementation. With less than one year to go before PSAK 24 (2010)
becomes effective, be sure to gain as much familiarity as possible during this time.
Dayamandiri wishes everyone a successful implementation of PSAK 24 (2010)!
May 2011
PT Dayamandiri Dharmakonsilindo
Jl. Pakubuwono VI No. 61
Jakarta 12120
Tel. (62-21) 7279 8620
Fax. (62-21) 7279 8640
infocenter@dayamandiri.co.id
www.dayamandiri.co.id
Disclaimer
This material is intended as a guide for discussion purposes; it does not represent nor substitute accounting
standards. PT Dayamandiri Dharmakonsilindo (“Dayamandiri”) does not take any responsibility for any action or
omission in reliance upon this material. Readers are therefore advised to discuss with and seek professional
advice from actuaries, consultants and public accountants for further discussions.
About Dayamandiri
Dayamandiri is an independent Indonesian-based actuarial consulting firm. We provide consultancies and
professional services in the areas of retirement plans, actuarial valuations, and insurance.
For more details on the services that we provide please visit our website: www.dayamandiri.co.id. For further
advice and discussion on this topic and any other related topics, please contact your Dayamandiri consultant or
send an email to infocenter@dayamandiri.co.id.
Dayamandiri has a strategic alliance with Actuarial Consulting Group in Singapore (www.acg-worldwide.com) and
The Pinnacle Consulting Group Limited in Hong Kong. Dayamandiri is also a member of Multinational Group of
Actuaries and Consultants or MGAC (www.mgac.org), an international network of independent actuarial
consulting firms.
www.dayamandiri.co.id PSAK 24 (Revised 2010) 4