From: Igor N Nakhshon

From: Igor N Nakhshon
Sent: Thursday, October 25, 2012 3:23:42 PM (UTC-O5:O0) Eastern Time (US & Canada)
To: Pension Consultation
Cc; Krista Ballis
Subject: Financial Statements Guidance Note #1-? Disclosure Requirements for Financial Statements
Filed Pursuant to Regulation 909 s. 76
Dear Sir
I Madam,
please accept the following comments on FSCOs draft “Financial Statements Guidance Note # 1
Disclosure Requirements for Financial Statements Filed Pursuant to Regulation 909 s.76” on behalf of
IBM Canada Limited.
IBM Canada Limited is a sponsor, administrator and preparer of financial statements of several defined
benefit and defined contribution pension funds.
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Capital management
Due to substantially different degrees of administrator’s involvement in managing the assets ol defined
benefit and defined contribution funds, it would be beneficial for the guidance to clarify ii provisions
related to capital management disclosures apply to defined contribution funds and / or defined
contribution sections of combined funds.
In particular, clarification of the points below would help financial statement preparers:
1. Since administrator’s involvement with the assets of defined contribution funds is limited to
administrative functions, do financial statement preparers have an option to exclude the assets of
defined contribution plans from the scope capital management per paragraphs 135 and
136 of lAS 1 which allow the preparers to define the scope of capital under management based on
information provided internally to key management personnel?
2. If assets of defined contribution funds are within the scope of capital management guidance, are
contributions to the fund considered required contributions and externally imposed capital
requirements”? Would this apply to both employer and employee contributions?
Financial instruments: Disclosures
Liquidity risk maturity analysis of interest-bearing financial instruments
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IFRS7 maturity analysis requirement is limited to financial iabilities only. Some financial statement
preparers voluntarily supplement this with maturity analysis of financial assets to enable the users to
assess entity’s ability to settle its contractual obligations as they come due,
The requirement to present maturity analysis of interest-bearing financial assets provides little value to
financial statement users and may be misleading.
When plan administrator elects not to disclose pension obligations and their maturity analysis nursuant
to section 76 of Regulalion 909, maturity analysis of financial assets does not reflect true liquidft risk of
the plan. In absence of maturity analysis of plan obligations, readers of financi& statements will not be
able to assess the degree to which maturities of financial assets are matched with maturities of the
liablities.
In a typical situation, interest-bearing financial assets are liquid and it is not managements intention Or
practice to hold them to maturity.
Maturity analysis of such assets does not portray accurate picture of the timing when the assets will be
realized.
Maturity analysis of financial assets may create an impression of liquidity risk where such a risk is not
present and will contravene managanients assessment of negligible liquidity risk of the plan.
Maturities of liquid interest-bearing financial assets are the source of interest rate risk (rather than
liquidity risk) and are reflected indirectly in interest rate sensitivity analysis which is based on duration
of interest-bearing financial assets.
It is our view that the requirement of maturity analysis should be limited to financial assets which
management is committed to hold to maturity or has no choice other than holding to maturity (illiguid
assets) since only these assets are a source of liquidity risk.
Thank you,
Igor Nakhshon, CPA, CCA
IBM Canada Ltd.
Corporate Reporting & Accounting Practices Lead Internal Address: C4/T64/3600/MKM
Phone: (905) 316-2308/ Fax: (905) 316-2535/ International Tie Line:
316-2308
E-mail: [email protected]