Question

In your research, did you locate any significant differences in accounting for pensions between U.S. GAAP and IFRS?

Answer 1

Dear Student,

Yes if it is required definitely we will show it as it also has importance in statements

Pension Expense
(increase in DBO and PBO during the accounting period.)

Company Pension Expense Components

Current Service Cost =
Amt by which company’s defined benefit obligation increases as a employee service result during the accounting period.

Interest Cost

amount by which a company’s existing defined benefit obligation increases as a result of the passage of time.
The current service cost is fully and immediately recognized for the accounting period. The interest cost is fully and immediately recognized for the accounting period.

Return on Plan Assets =during the accounting period amount of returns generated by plan assets.
Typically, companies apply EXPECTED return on plan assets when calculating pension expense.

The use of expected returns is allowed by GAAP and IFRS. Since this is an asset return, the return on plan assets component acts as a contra expense, offsetting other costs.

Amortization of Past Service Cost = the difference in the DBO after a plan amendment has adopted and the DBO before the plan amendment. The plan amendment could reduce costs, creating a benefit that reduces the pension expense.

GAAP: this is recorded as a direct to equity adjustment outside of net income, as part of other comprehensive income for the accounting period in which the amendment took place. A periodic past service cost expense is then amortized to the pension expense over the remaining service lives of the employees covered by the amendment.

IFRS: if the amendment affect any vested obligations, then the vested percentage of the past service cost is incorporated in pension expense for the accounting period of the amendment and the remaining past service cost for unvested obligations is amortized to future pension expense calculations over the course of the related

vesting period.

Amortization of Actuarial Gains and Losses.
Actuarial gains and losses arise from: Difference between
expected plan returns and
actual plan returns.
and Changes in actuarial assumptions that impact the current service cost.

Examples: employee life expectancy, salary growth forecasts,
interest cost component assumptions, retirement dates, etc.

GAAP: actuarial gains and losses are recognized as part of other comprehensive income during period of gain/loss, on the company’s statement of changes in shareholder’s equity.

IFRS: actuarial gains and losses do not flow to equity, but are applied to assets or liabilities and are incorporated in the calculation of a net asset or liability on the balance sheet. A net pension asset is reported as pre-paid pension expense; a net liability is accrued pension expens

For more information you can refer Standards employee benefit.

Hope this will help you