Pension plan info PBO: 45,200 FV of Plan Assets: 29,522 Unrecognized actuarial losses: 4,250 Unrecognized past service costs: 433 Company uses IFRS Management decided to change deferring actuarial gains and losses to recognizing them as they arise. After the actuarial revaluation of the pension plan and the change in accounting policy related to actuarial gains and losses, the net pension liability (in ‘000s) Elbe would report on its statement of financial position will be closest to: A. €11,428. B. €15,245. C. €15,678. Answer Key: B is correct. IFRS does not recognize the deferred portion of past service costs in the balance sheet liability. The net pension liability reported when actuarial gains and losses are recognized immediately is calculated as follows: Present value of defined benefit obligation € 45,200 Less fair value of plan assets (29,522) Less unrecognized past service costs (433) Net pension liability € 15,245 Why not subtract the 4,250 unrecognized actuarial losses as well? I know the Schweser notes states that under IFRS, companies have a choise of fully recognizing actuarial gains and losses in the income statement or in OCI. However, the question didn’t point out what the company’s choise is. So it looks like the answer key is based on the assumption that the firm chose to recognize actuarial gains and losses in the income statement? Would appreciate it if someone can clarify…Thanks!
That question stood out to me as well. The first line of the question tells you what the company’s choice was. Since they now recognize them, you don’t have to adjust for that (similar to GAAP)
“Management decided to change deferring actuarial gains and losses to recognizing them as they arise.”
ha…gotta read the vignette more carefully…thanks!