CIA Annual Meeting Assemblée annuelle de l’ICA June 29 & 30, 2006 Ÿ Les 29 et 30 juin 2006 Ottawa, Ontario

Pension Accounting- Convergence and IFRS CIA Annual Meeting Ÿ Assemblée annuelle de l’ICA Pension Accounting- Convergence and IFRS Paul G. Cherry, FCA Chair Accounting Standards Board Although the discussion is in context of pension plans, similar issues relate to OTHER POST-EMPLOYMENT BENEFITS. OPEBs are typically pay-as-you plans, ie unfunded

Current Status: global convergence on a flawed standard? CIA Annual Meeting Ÿ Assemblée annuelle de l’ICA Current Status: global convergence on a flawed standard? Basic model is same Extensive “smoothing” Extensive use of assumptions Delayed recognition of gains/losses Corridor approach Economic losses often reported as accounting assets Most important information often buried in footnotes

FASB Phase I: Worth the Effort? AcSB has already bolstered pension footnote disclosure Impact on debt/equity ratios, debt covenants, etc “Standards overload” Any change entails certain costs Potential adverse impact on other projects

Phase II Risk of “duelling projects”? FASB Phase II IASB comprehensive project This seems contrary to working agreement between FASB/IASB

CIA Annual Meeting Ÿ Assemblée annuelle de l’ICA Some Canadian Circumstances Regulatory and accounting rules differ for actuarial valuations Uncertainties about ownership of surpluses Frequency of actuarial valuations CRA rules Will greater accounting transparency cause shift to defined contributions plans?

AcSB Strategic Direction IFRS will be basis of reporting for public companies Transition plan Transition period approximately 5 years Implementation plan: available June 30 Avoid new/revised standards during transition that conflict with IFRS

What Should AcSB Do? Follow FASB Phase I? Adopt IAS 19 “free choice”? Would create conflicts with IAS 19 IASB gives free choice IASB choice also affects net income Adopt IAS 19 “free choice”? Wait for completion of IASB comprehensive project? coincides with targeted crossover to IFRS