[mgoloubenko]

So while doing the Becker final exam, the following question came up: Blah blah company has the following information for it’s defined benefit pension plan as of December 31:

Unrecognized prior service costs 240,000

Unrecognized net gain 75,000

Net Periodic Pension costs 385,000

Blah blah has en effective tax rate of 30%. Under IFRS what amount would Blah blah report in AOCI related to it’s pension plan?

1)0

2) 115,000

3) 165,000

4) 385,000

Answer:0.

However, this doesn’t match up with what I studied. I assumed $75,000 (tax effect) would be in AOCI but according to the final exam explanation it states that neither unrecognized prior period service costs nor unrealized gains appear in OCI. However, the way I studied it and the way that the textbook states ( pg F6-10)- under IFRS, actuarial gains and other remeasurements of the asset ARE reported in OCI…

Can anyone explain this? For clarification, the unrecognized prior year service cost is not the issue- just the unrecognized net gain.

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[Anonymous]

Don't know if this helps but

“Unrecognized prior service costs and unrecognized pension gains/losses are off balance sheet items disclosed in footnotes, results in pension asset/liab on B/S = funded status adjusted for unrecognized prior service cost and unrecognized pension G/L

Funded Status

+Unrecognized prior service cost

+Unrecognized losses

-Unrecognized gains

= Pension asset/liability under IFRS”

[Anonymous]

lol! how funny i'm actually studying this topic. Remember that under IFRS, unrecognized prior service cost and unrecognized pension gains and losses are off-balance sheet items and are disclosed in the footnotes only. They are not included in the pension benefit asset/liability. Not sure if this answered your question 🙂

p.s. Trojans fight on!!!

[mgoloubenko]

Okay in the case of IFRS, nothing recognized in the OCI component?

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REG-12/6/12 PASSED

USC MAcc- Fight on!

They say good things come to those who wait, but only those things that are left by those who hustle.

[Anonymous]

-Prior service costs (referred to as past service cost under IFRS) is expensed immediately for all costs that relate to employees who have already vested. Off B/S item that is disclosed (US = in AOCI)

– Defined Benefit Obligation (DBO) is the defined pension plan liability. Same as PBO under GAAP.

– G/L – you can 1. Recognize G/L on I/S in period incurred (same as US), 2. Recognize in the footnotes only in the period incurred then amortize pension expense over time using corridor approach, 3. Recognize in OCI in period incurred, these G/L stay in OCI and are not amortized.

-overfunded pension plan is recorded as asset on B/S, so you could have a pension asset under IFRS

-Underfunds pension plan is reported in full as a pension liability on the B/S

-Unrecognized prior service costs and unrecognized pension gains/losses are off balance sheet items disclosed in footnotes, results in pension asset/liab on B/S = funded status adjusted for unrecognized prior service cost and unrecognized pension G/L

Funded Status

+Unrecognized prior service cost

+Unrecognized losses

-Unrecognized gains

= Pension asset/liability under IFRS

[mgoloubenko]

@ accrual_world, with the formula you posted about the answer to the question according that that would be C) 165,000 which is an incorrect answer

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BEC 7/13/12- PASSED
AUD 8/16/12- Ughhh 71, Rematch: 90!!!
REG-12/6/12 PASSED

USC MAcc- Fight on!

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[Anonymous]

That's because with the formula @accrual_world posted, the answer “C” would be reflected in the Balance Sheet. The question specifically asks what is reported in AOCI. The answer C would be correct if the questions asked what would be recorded as a pension asset/laibility under IFRS.

[mgoloubenko]

Okay now I follow!! Thank you both very much 🙂

FAR 4/9/12- PASSED
BEC 7/13/12- PASSED
AUD 8/16/12- Ughhh 71, Rematch: 90!!!
REG-12/6/12 PASSED

USC MAcc- Fight on!

They say good things come to those who wait, but only those things that are left by those who hustle.

[Author]

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