Question

How does the IFRS criteria for accounting for a pension plan curtailment differ from the U.S. GAAP criteria?

Answer 1

Curtailment of pension plan under US GAAP:

Curtailment resulting gains is recognised when the employee terminates or suspends a plan or amendment is finalised.

Similarly curtailment losses are recognised when the losses are probable and effects can be reasonably estimated.

FAS 88: requires curtailment losses is to be recorded when it is probable and impact of it could be estimated.

Curtailment gains should be recognised only when employee terminates employment or there is any gains resulting from plan amendment.

Curtailment of pension plan under IFRS:

Curtailment losses or gains are recognised as and when the curtailment occurs. Curtailment occurs when a plan amendment is contractually binding or a commitment is made by the entity.

IAS 19 requires that any curtailment gains or losses be recognised immediately when the company has any binding contract.

Implication: The deferral of gain will be eliminated under IASB 19.