Settlements, Curtailments, International

Question 1

What is a pension plan settlement?

Answer 1

an irrevocable transaction that relieves the plan of primary responsibility for all or a portion of the PBO. Ex. includes lump sum cash payments to replace future pension benefits

Question 2

What is a pension settlement gain or loss?

Answer 2

The net pension gain or loss not yet recognized in pension expense at time of settlement. If only part of the PBO is settled, then the gain/loss is recognized pro-rata

Question 3

What if a pension plan is terminated when plan assets exceed PBO?

Answer 3

Then a gain is recognized

Question 4

What is a curtailment in regards to pension plans?

Answer 4

Occurs when employees terminate earlier than expected or when a business contracts or reduces the scope of its operations

Question 5

What is the PBO called under IFRS?

Answer 5

DBO (Defined benefit obligation)

Question 6

What is a pension liability or asset called on the balance sheet under IFRS?

Answer 6

Defined benefit liability or asset

Question 7

How is Prior Service Cost treated under IFRS?

Answer 7

PSC is expensed immediately for the amount vested. The unrecognized PSC is a contra liability

Question 8

What is the difference between GAAP and IFRS in relation to OCI for Pension accounting?

Answer 8

GAAP - full amount of PSC without respect to vesting and pension gains and losses
IFRS - only pension gains and losses