COVID-19 and the declining interest rate scenario increase the need to reinforce care when preparing financial statements in 2020. Among the various risks to which companies are exposed, increased attention should be paid to liabilities with benefit plans offered to employees for the purpose of complying with IAS-19 or Technical Pronouncement CPC 33 (R1).
One of the immediate consequences brought about by the COVID-19 scenario was a drastic change in the behavior of users of health care plans. Fearing contamination, users stopped going to doctors, clinics, hospitals, and laboratories. If, on the one hand, this behavior reduces companies' expenses with the health care plan, reflecting on the company's liabilities, it is also true that as soon as the vaccine is discovered, we will have a boom in demand, due to the suppressed demand brought by the pandemic. By this we mean that, in 2020, it is very likely that actuarial reports for the valuation of liabilities with a health care plan indicate actuarial gains compared to the 2019 financial year. The question is whether or not these gains will outweigh any actuarial loss, due to the reduction in the interest rate. Regarding retirement plans, the reduction of the interest rate is a complicating factor, since in defined benefit plans, companies must guarantee the actuarial profitability of the plan. As interest rates on government bonds linked to the IPCA fell, there will be a need to seek better returns on variable income, which represents more risk.
Among the list of benefits eligible for accounting, we highlight: retirement plans, health care plans, group life insurance, premiums for length of service, possibly the FGTS fine for unfair dismissal, and other benefits contained in collective or union agreements. Those who do not have financial assets represent a higher risk of generating hidden liabilities. This is the case of health care plans, given their relevance in relation to the others.
Before 2015, only publicly traded companies were required to follow the standard. However, after the adoption of the IFRS by the Internal Revenue Service in 2015, the obligation was extended to companies covered by Law No. 11,638/2007. But, after all, what does the standard say? The Technical Pronouncement CPC 33 R1, establishes that the The purpose of the standard is to establish the accounting and disclosure of benefits granted to employees. To this end, the Pronouncement requires the entity to recognize: (a) a liability when the employee provided the service in exchange for benefits to be paid in the future; and (b) an expense when the entity uses the economic benefit derived from the service received from the employee in exchange for benefits to that employee”.
In more critical scenarios such as the current one, the need to carry out an updated valuation of assets and liabilities with such benefits is increased (see IAS 34/CPC/21.IE.B9; Insights 4.4.360, 5.9.150).
However, contrary to what is established by the norm, many companies have systematically despised and/or resisted recording the commitments with the benefits mentioned in the preamble to this document. Judging by the content of the allegations we have observed, this fact is due much more to the complexity of the topic and the lack of understanding on the part of those involved with the matter in the companies, than to bad faith itself. The following are some of the allegations used by company managers to not record the amounts in the financial statements:
· Actuarial liabilities in relation to the health care plan are immaterial;
· The change in the financing model of the health care plan;
· The company adopted the age range table for the health care plan;
· The company does not have a retired employee and/or the employee will not remain with the company until retiring;
· The health care plan is not a defined benefit plan.
None of the above allegations justify the non-accounting of liabilities in the financial statements. In view of the above, we recommend great attention and caution when preparing financial statements in 2020, as the risks of not accounting for the above-mentioned benefits, in accordance with Technical Pronouncement CPC 33 R1 may pose some risks for companies, especially the omission of the obligation in the financial statements not to fully reflect the company's commitment.
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