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IAS 26 is an International Accounting Standard issued by the International Accounting Standards Board (IASB) that specifies the measurement and disclosure requirements for the reports of retirement benefit plans. [1] It complements IAS 19 Employee Benefits, which deals with how employers report the costs of such plans in their own financial statements. [2]
IAS 26 applies to the reports of retirement benefit plans where such reports are prepared. It regards a retirement benefit plan as a reporting entity separate from the employers of the participants in the plan. [3] All other IFRS standards apply to the reports of retirement benefit plans to the extent that they are not superseded by IAS 26. [4]
The standard distinguishes between two primary types of retirement benefit plans, each with different reporting requirements: [5]
In a defined contribution plan, the amount of future benefits is determined by the contributions paid by the employer and/or the employee, along with the investment earnings of the plan. The report of a defined contribution plan should contain: [6]
In a defined benefit plan, the amount to be paid as a retirement benefit is determined by a formula, usually based on employees' earnings and/or years of service. The report must provide information about the actuarial present value of promised retirement benefits, which can be presented in one of three ways: [7]
IAS 26 requires that retirement benefit plan investments be carried at fair value. In the case of marketable securities, fair value is usually market value. [8] If an estimate of fair value is not possible, the reason why fair value is not used must be disclosed. [9]
| Feature | Defined Contribution Plan | Defined Benefit Plan |
|---|---|---|
| Primary Goal | Reporting of investment performance and net assets. | Reporting of net assets and the ability to meet promised benefits. |
| Actuarial Info | Not required. | Required (Actuarial present value of promised benefits). |
| Asset Valuation | Fair Value. | Fair Value. |
The report of a retirement benefit plan, whether defined benefit or defined contribution, should also include the following information: [10]
As of 2025, IAS 26 remains an effective and active standard within the IFRS framework. While it has been in place since 1988, it continues to serve as the primary guidance for the financial reporting of retirement benefit entities.
It is important to distinguish IAS 26 from IAS 19 Employee Benefits:
Consequently, a company will report its pension liabilities under IAS 19, while the independent fund managing those assets will issue its own financial statements in accordance with IAS 26. [11]