Question

We adopted IFRS two years ago. We applied all accounting policies as required by IFRS, except for defined benefit plan accounting under IAS 19.

We did not use projected unit credit method in accounting for defined benefit plans. We also did not use the actuarial valuations of our defined benefit plan liability.

We simply accrued 1-month salary to every year of employee’s service at the end of each year. We find this method simple, accurate and not requiring further costs.

We prepared the financial statements under IFRS and in the notes, we disclosed non-compliance with IAS 19. Is it OK?
 

Answer

No, it is not OK.

You cannot state that your financial statements are compliant with IFRS unless they comply with ALL requirements of IFRS.

When you disclose non-compliance, this is not the remedy of the situation. Instead, you cannot state that you fully complied with IFRS.

Let me add one comment to the cost.

In some cases, IFRS tells you that you can simplify the situation (i.e. use some practical expedient to ease calculation) when there is undue cost and effort needed.

However, it does not mean that you should not incur any cost, or that your cost shall be zero.

“Undue” basically means cost exceeding the benefits of that information. In my opinion, cost for actuarial valuation of your defined benefit liability and then the application of projected unit credit method will not be undue in this sense.

Please see IAS 1.16 for your reference.