For pension accounting, what is the correct amortization period for unrecognized gains and losses? Schweser page 197 says “amortization is made over the average remaining service life of the employees.” Schweser page 207 then says “IFRS requires that actuarial gains and losses be amortized over the employee’s service life, rather than over the employee’s life expectancy, as is the case under US GAAP.” So for US GAAP, is the amortization period the service life or the life expectancy? Did it change with the new standards? Is it different for the different types of gains and losses? Thanks in advance for the help.
Tricky. very inconsistent. i checked the CFAI text to hopefully find an answer and it is similar, where in one place it mentions service life, but under the comparison to IFRS it says life expectancy. the only difference is this: in the text, it says, “Gains and losses amortized under the corridor approach can differ if most plan participants are retired. US GAAP requires that the gains and losses are amortized over the life expectancy rather than service lives IN THIS CASE.” I wonder if in US GAAP, ONLY if most of the employees are retired they use life expectancy, otherwise service life. IFRS only uses service life no matter what… thoughts?
I found this one to be really tricky, too. The way I see it, it breaks down like this: 1. Liability gains/losses - taken in to the net amount immediately 2. Asset gains/losses - amortized over not more than 5 years 3. “Net” gains/losses in excess of the corridor - amortized over the remaining service life of the current employees 4. In the case of retired employees, gains/losses in excess of the corridor are amortized over the life expectancy under US GAAP, but only over the remaining service life under IFRS.
I agree totally!
Under FAS No.87, there is term 32 that “… If all or almost all of a plan’s participants are inactive, the average remaining life expectancy of the inactive participants shall be used instead of average remaining service.” While under IAS 19, I only see that the portion recognised is the excess divided by the expected average remaining working lives of the participating employees. Hi darkhelmet, I don’t quite understand 1. and 2. could you explain what’s the corresponding name of it on the notes?
I don’t have the books handy right now, but I pulled this straight out of the CFAI materials. If I recall correctly, the only material difference between US GAAP and IFRS is IAS 19, as you mentioned. Everything else is materially the same. I don’t recall that names were assigned to 1&2. It was simply a description of the various categorizations and treatments i.e. there is a different treatment for balance sheet items vs. income statement items.