IFRS Analysis
Porter Gervais
Professor Duron
10/21/13
IFRS Rough Draft Ch.20
IFRS vs. GAAP
When accounting for pensions and post-retirement benefits, IFRS and GAAP have similarities as well as differences. There are two pension plans that are frequently used in accounting for pensions. These two plans are known as, defined contribution plan and defined benefit plan. Both GAAP and IFRS separate their pension plans, but their accounting for defined benefit plans differ. Another major difference occurs when recognizing actuarial gains and losses. Differences between IFRS and GAAP arise when distinguishing unrecognized past service cost. IFRS and GAAP also have their similarities. They both have similar views when it comes to their view of pensions and postretirement benefits. Both IFRS and GAAP also use the corridor approach when recognizing gains and losses. The defined contribution plan relies on an employer who contributes an amount on certain periods to a pension trust, while the defined benefit plan summarizes the benefits that employees will receive when they retire. There are similarities and differences concerning defined benefit plans. Both IFRS and GAAP recognize liabilities and costs for employee benefits during the period when the service is provided. It’s important to understand that GAAP refers to the defined benefit obligation as the (APBO), while IFRS states it as the (PVDBO). The differences start occurring when recognizing net funded status. Under U.S. GAAP, the status is considered overfunded or underfunded, after the difference between the fair value of the plan assets and APBO is calculated. IFRS calculates it differently. The Academic Resource Center of the Ernst & Young Foundation derived the following concerning IFRS, “if underfunded, a liability must be recognized equal to the PVBO plus or minus any unrecognized actuarial gains and losses, minus unrecognized prior service costs, minus the fair value of any plan assets.” If
Professor Duron
10/21/13
IFRS Rough Draft Ch.20
IFRS vs. GAAP
When accounting for pensions and post-retirement benefits, IFRS and GAAP have similarities as well as differences. There are two pension plans that are frequently used in accounting for pensions. These two plans are known as, defined contribution plan and defined benefit plan. Both GAAP and IFRS separate their pension plans, but their accounting for defined benefit plans differ. Another major difference occurs when recognizing actuarial gains and losses. Differences between IFRS and GAAP arise when distinguishing unrecognized past service cost. IFRS and GAAP also have their similarities. They both have similar views when it comes to their view of pensions and postretirement benefits. Both IFRS and GAAP also use the corridor approach when recognizing gains and losses. The defined contribution plan relies on an employer who contributes an amount on certain periods to a pension trust, while the defined benefit plan summarizes the benefits that employees will receive when they retire. There are similarities and differences concerning defined benefit plans. Both IFRS and GAAP recognize liabilities and costs for employee benefits during the period when the service is provided. It’s important to understand that GAAP refers to the defined benefit obligation as the (APBO), while IFRS states it as the (PVDBO). The differences start occurring when recognizing net funded status. Under U.S. GAAP, the status is considered overfunded or underfunded, after the difference between the fair value of the plan assets and APBO is calculated. IFRS calculates it differently. The Academic Resource Center of the Ernst & Young Foundation derived the following concerning IFRS, “if underfunded, a liability must be recognized equal to the PVBO plus or minus any unrecognized actuarial gains and losses, minus unrecognized prior service costs, minus the fair value of any plan assets.” If
Cited: Kieso, Don E., Jerry J. Weygandt, and Terry D. Warfield. Intermediate Accounting. 14th ed. N.p.: Wiley, 2012. Print. Halliwell, James. "Defined Benefits." IFRS. N.p., n.d. Web. 20 Oct. 2013. .