Question

what are the differences between us GAAP and IRFS with respect to accounting and reporting for post retirement benefits

Answer 1

Differences between US GGAP and IRFS with respect to accounting and reporting for post retirement benefits:-

ASC Topic 715 addresses the accounting for pensions, other postretirement, and certain special or contractual termination benefits. While IFRS and U.S. GAAP contain a similar objective for entities to recognize the cost such benefits over the employee service period as the entity becomes obligated, there are several differences between IFRS and U.S. GAAP in this area, relating to recognition, measurement, presentation and disclosure.

Such differences include the following:-

1.  Distinguishing defined benefit from defined contribution plans

2. Definition of defined contribution plans

3. Accounting for employers with two or more plans

4.Timing and frequency of valuation

5.Specificity regarding the measurement of plan liability using the project unit credit method

The IASB issued an amendment to IAS 19 for post-retirement benefits in June 2011. The revised guidance is similar to U.S. GAAP with respect to the requirement for an entity to recognize a net pension asset or liability. However, differences remain regarding how the change in the pension asset or liability is recognized and the disaggregation of the defined benefit pension cost. There are also differences in the attribution of benefits and determination of plan assets in addition to transaction- or event-specific items such as accounting for changes in assumptions, plan amendments, funded status of plans, and over-funded plans. Examples of such differences include the following:

Attribution of benefits to service periods :- U.S. GAAP and IFRS differ with respect to certain technical aspects of attribution, including that, for example, under IAS 19, attribution occurs from the date when service by the employee first leads to benefits under the plan until the date when further service will lead to no material amount of further benefits under the plan, other than from further salary increases. Under U.S. GAAP, the attribution period may continue through the date of retirement if further salary increases lead to incremental future benefits.

Plan assets :- U.S. GAAP and IFRS differ in guidance regarding the determination as to what constitutes a plan asset, including, for example, under U.S. GAAP, insurance policies can be plan assets only when held by the plan. Under IFRS, plan assets include qualifying insurance policies, which are insurance policies issued to the entity by an unrelated entity, the proceeds from which

(1) can be used solely to pay or fund employee benefits,

(2) are not available to the employer’s creditors (even in bankruptcy), and

(3) cannot be returned to the entity except as reimbursement for employee benefits paid or when the fund is in surplus.

U.S. GAAP also contains detailed guidance on the treatment of certain plan assets (e.g., employer’s own securities, life insurance policies with a cash surrender value, and assets of rabbi trusts) for which IFRS contains more general guidance.