Analysis of Foreign Pension Plans for Employees

2007/2008 Edition This PricewaterhouseCoopers publication is for those who wish to gain a broad understanding of the key similarities and differences between IFRS, US GAAP and Swiss GAAP FER. No summary publication can do justice to the many differences of detail that exist between IFRS, US GAAP and Swiss GAAP FER. Even if the guidance is similar, there can be differences in the detailed application, which could have a material impact on the financial statements. It needs to be stressed that this brochure deals with the main differences only. Many more pages would be needed to be

UK’s IFRSs are designed to make it easier to compare the performance of organizations in different countries, rather than each country maintaining its own GAAP, which makes such comparisons difficult. All listed EU companies have been required to use IFRSs since 2005. The adoption of IFRSs by the private sector is expected to have various benefits for both companies and investors; including (1) UK’s IFRSs will remove the need for companies with foreign subsidiaries to translate the accounts for consolidation with the parent company accounts. Also (2) it will be easier for investors to make informed decisions about the performance of companies in different countries because of the increased transparency and a better understanding of financial statements.

There are over a million residents living in Rhode Island between the ages of 21 to 65. The majority of the Rhode Island population is not employed by the state nor does an individual concern oneself with state issues (Randazzo, 2013). The Employee Retirement System of Rhode Island (ERSRI) was originated to cover state employees and teacher’s retirement, disability, survivor, and death benefits (Randazzo, 2013). In 1987 and 1989, the State Police Retirement Benefits Trust and the Judicial Retirement Benefits Trust were established (Randazzo, 2013). All pension plans in Rhode Island are managed by the state and the funds are commingled for investment purposes in determining the actuarial value

GAASB is proposing some major improvements to the reporting of pension plans. (GASB Proposes Major Improvements for Pension Reporting, 2011). Immediate recognition of more components of pension expense will be required, including the effect on the pension liability of changes in benefit terms, rather than deferred and amortization over as many as 30 years. Use of a discount rate will be required that applies the expected long term rate of return on pension plan investments where pension assets are expected to be available to make projected benefit payments and the interest rate on a tax exempt 30 year AA or higher rated municipal bond index to projected benefit payments where plan assets are not expected to be available for long term investment in a qualified trust. A single actuarial cost allocation method, the entry age normal, will be required. Governments participating in cost sharing multiple employer plans will be required to record a liability equal to their proportionate share of any net pension liability for the cost sharing plan as a whole. Governments in all types of covered pension plans will be required to present more extensive note disclosures and required supplementary information.

The U.S is moving toward IFRS (Forgeas, 2008). In the near future, all US company may need to report financial statements under IFRS. This makes the adaptation of IFRS unavoidable. Recently, some large multinational

Deloitte Touche Tohmatsu (2008). IFRS and U.S. GAAP A Pocket Comparison. Retrieved on November 7, 2011 from: http://www.iasplus.com/dttpubs/0809ifrsusgaap.pdf

Commenter argues that the new rule to apply for pension benefits will result in unnecessary delays that will result in denials for veterans and beneficiaries. VA will make the application process easier for veterans and beneficiaries to apply and know the qualification on how to receive VA pension benefits.

For the jurisdiction of British Columbia, the Registered Pension Plan member contributions are due within thirty days after the end of the month in which the deductions occurred. In practice, there may be agreements with pension administrators that require earlier and/or more frequent remittances. The monies withheld from the employee and the employer contributions must be held in trust prior to remittance. The Registered Pension Plan types would be either a Defined Benefit Plan or a Defined Contribution Plan.

Residents in Abbotsford, BC seeking legal counsel pertaining to pension division governed by the section of Benefits and Pension Law will discover changes affecting survivors, limited members and maturing pensions. In general, legal assistance is needed when benefit and pensions are affected as a result of changes within a relationship. Legal services in Abbotsford, BC include advice on the pension plan at issue, clarification of division options available and drafting of the pension division arrangements.

Accordingly, the $39.3 million actuarial gain which resulted from the restructuring is included in Accrued Pension Costs in the accompanying Balance Sheet and is being amortized to income over a ten-year period commencing in 1984. The effect of the changes in the investment return assumption rates for all U.S. plans, together with the 1984 restructuring of the U.S. Salaried Employees' Plan, was to reduce pension expense by approximately $4.0 million in 1984 and $2.0 million in 1983, and the actuarial present value of accumulated plan benefits by approximately $60.0 million in 1984. Pension expense in 1983 was also reduced $2.1 million from the lower level of active employees. Other actuarial gains, including higher than anticipated investment results, more than offset the additional pension costs resulting from plan changes and interest charges on balance sheet accruals in 1984 and 1983.

These benefits typically are a function of an employee’s years of service and of the compensation level in the years approaching retirement. Because of this uncertainty, for as long as the plan continues, the employer is responsible for the payment of the defined benefits. A company must establish an appropriate funding pattern to ensure the availability of funds at retirement in order to provide the benefits promised. Due to this risk, the expense recognized each period is not necessarily equal to the cash contribution. One interesting factor of this type of benefit plan is the role actuaries play in the accounting process. Actuaries are individuals trained through a long and rigorous certification program to assign probabilities to future events and their financial effects. For pension plans, actuaries compute future salaries, retirement frequency, along with various pension measures that affect the financial statements. Accounting for defined benefit plans relies heavily upon information and measurements provided by

This paper will also analyse the various studies to identify whether firms have changed since the conversion to IFRS from GAAP. Furthermore we were unable to clearly identify whether there were any changes within firms that have converged from the previous GAAP towards

There have been a number of proposed and upcoming changes to GAAP and solvency reporting standards in the US, Canada and Europe in recent years. In particular, significant efforts have been made to increase convergence between US GAAP and IFRS. The following report discusses the pros and cons of convergence between standards in different jurisdictions, as well as convergence between GAAP and solvency standards, in relation to insurance contracts. Here, the term ‘GAAP’ refers to financial reporting for investors, shareholders and creditors. Solvency standards refer to the regulatory requirements imposed on insurers. The jurisdictions discussed have been limited to those in which The Greatest Life Insurance Company operates in: namely, the US, Canada and Europe.

There are different impacts that the IFRS will have on the pension reports of these two companies. This is irrespective of the differences that are imminent in the pension plans of the two companies. There is acceptance of voluntary contributions and a new method of governing such finances. With these contributions, there is slashing of the whole amount of funds that is necessary for the pension plan. Therefore, the mandatory contributions for the plans will be low. This is especially for a company like Coca Cola where both employers and employees do the contributions (Bradford 2011). Therefore, the company will have the ability to control the planning of the budget beforehand. In addition, the contributions to the pension plans have taxes deducted. However, this is only done up to a certain predetermined level. All this will have a positive reflection in the balance sheets of the companies. In this case, the most favored company when it comes to the taxes is PepsiCo.

With complete notion and awareness of how each country has their set of rules, “the goal of IFRS is to provide a global framework for how public companies prepare and disclose their financial statements” (Rouse, 2011). This view is meant to provide general guidelines, as well as international comparisons through conventional and edifying means. To bring broader and vivid objectives, IFRS replaced IAS, the older standards, in order to bring a more comprehensive and simplified accounting procedures.