Pension expense

How did the pension expense change from 2012 to 2013?

They’re one year older.

(Seriously, though: your question isn’t clear.)

I was told by a lecuturer that the pension expense portion of the 2013 curriculum is now different from the 2012 curriculum. I can’t imagine CFAI to have completely changed the entire study session so I was hoping to get some feedback to where the changes were.


There are significant changes - but I don’t recall much from 2012 so can’t compare - but top of my head, IFRS is different while GAAP is still the same.

From 2013 the IFRS made the following two important changes.

  1. Only one interest rate instead of “Discount rate” and “Expected return rate” (which is still used in GAAP).

  2. Actuarial changes are now taken directly on the balance sheet. Before it was only in the footnotes and afterwards gradually transferred to the balance sheet via a corridor. In IFRS It stays however still on the balance sheet and is not like in GAAP transferred ti P/L via another corridor principle.

These changes are having large effect for some companies here in Europe. E.g. the shareholders equity of Volvo is decreasing by 15% and the shareholders equity of Daimler is decreasing by 17% due to the changes.

It is however important to note that the changes are not displaying any hidden costs or obligations. The clever analyst could have made the adjustments by reading the footnotes carefully.

Given the current low interest rates and the new requirement of using only one interest rate, it is fair to claim that IFRS currently is more “conservative” on pension accounting than GAAP.

Best Regards

Henning Hansen

Thanks! I’ll definitely have to go through this a bit more but at least I know where to narrow my focus.