Please see if you can help me with my question here : Extract from schweser pg 49 book 2 The changes in acturial assumptions are accumulated with the deferred gains and losses that result from the differences in the expected return and the actual return on assets. Once the Once the ‘accumulated deferred gains and losses’ exceed 10% of greater of PBO or plan assts, amortization is required (over service life of the employee). Questions Does ‘amortization of past service cost’ become a part of this calculation of the 10% corridor? Also im confused with something. At one end it says that amortization of past service cost is not expensed immediately but is reported as a part of other comp income and amortized over remaining service life of the affected employees. It also mentions that under IFRS the past service cost for benefits that are full vested are recognized in pension expense immediately. IS this highlighting a difference in GAAP and IFRS? Pls help out if you can
Yes, amortization of past service cost is part of corridor method USGAAP SFAS 87 says it should be amortized over the average remaining service life. IFRS IAS 19 (at least until recently) says - vested (retired and vested active): expensed immediately. - not vested: amortized. There has been some recent changes in IFRS rules concerning pension and harmonizing with USGAAP, but I don’t know whether it applies to this area.
Thanks Elcfa, Do you know where i can find in the text or schweser where it isays amortization of past service cost is part of the 10% corridor thing? I just cant seem to find this anywhere. Or am i going into too much unnecessary detail? Session 6 scares me! Thanks for the clarification on the second question, my findings agree with yours! smile.
JayD I was mistaken when I wrote "amortization of past service cost " was part of corridor method. It is not. My bad. Corridor method only applies for Actual gains and losses (e.g., actual vs. expected return of asset…). Amortization of past service cost will always be recognized, not delayed using corridor method. The difference between SFAS 87 and IAS 19 is still correct.