Last update 04/01/2020
IAS 19 Definition: Asset ceiling – The asset ceiling is the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the defined benefit plan.
Net defined benefit liability (asset) – The net defined benefit liability (asset) is the deficit or surplus, adjusted for any effect of limiting a net defined benefit asset to the asset ceiling.
Net interest on the net defined benefit liability (asset) -Net interest on the net defined benefit liability (asset) is the change during the period in the net defined benefit liability (asset) that arises from the passage of time.
Statement of financial position
Entities recognise the net defined benefit liability (asset) in the statement of financial position (being equal to the deficit (surplus) 
in the defined benefit plan and the possible effect of the asset ceiling).
When an entity has a surplus in a DBP, it measures the net defined benefit asset at the lower of:
- The surplus in the defined benefit plan
- The asset ceiling (being the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan), determined using the discount rate in reference to market yields at the end of the reporting period on high-quality corporate bonds (IAS 19 83).
Asset ceiling test
Sometimes, a net balance recognised in respect of a defined benefit pension plan may be an asset. Consistent with the principle that a pension plan surplus is regarded as an asset to the extent that the employer can gain an economic benefit from it, IAS 19 contains a restriction over the amount that may be recognised. The amount recognised as an asset may not exceed its recoverable amount. This amount is measured as the lower of:
- the surplus in the defined benefit plan; and
- the asset ceiling determined using the discount rate specified in paragraph 83 of IAS 19.
The application of this restriction is further explained in the following example:
| CU’000 | |
| The present value of the defined benefit obligation | (1,000) |
| The fair value of the plan assets | 1,200 |
| Surplus determined in accordance with paragraph 53 of IAS 19 | 200 |
| Asset-ceiling: Present value of available future refunds and reductions in future contributions (at discount rate specified in paragraph 83 of IAS 19) | 170 |
The amount that may be recognised as a net defined benefit asset in this example is CU170,000, being the present value of available future refunds and reductions in future contributions (the lower of ……).
See also: The IFRS Foundation
