Analysis of Foreign Pension Plans for Employees

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Pension Analysis The current effects of IFRS effect organizations that hold foreign pension plans for employees. IFRS methodology is similar to US GAAP with deferred recognition of actuarial gains or losses, except where past service costs are recognized immediately, instead of being amortized over the service period or life expectancy of workers. Under IFRS, actuarial gains and losses can be recognized in equity, but not under US GAAP. US GAAP has a minimum liability reported in the statement of financial position, but IFRS does not. IFRS limits recognition of pension assets, but US GAAP has no limitation. Curtailment gains and losses are recognized when announced under IFRS and is calculated different from US GAAP. IFRS expenses termination benefits when the employer is committed to pay and US GAAP expenses them when employees accept and they can be reasonably estimated. (Epstein) These differences could make the pension expenses for the foreign pension plans higher than when they were reported under US GAAP where past service costs are recognized and expensed immediately. Under IFRS, actuarial gains and losses recognized in equity causes the equity on the balance sheet to more than it would under US GAAP. The minimum liability increases pension liability under US GAAP, but has no affect under IFRS. The limited recognition of pension assets under IFRS can cause a higher deficit in the fund status. The different calculation of the curtailment gains can also have an
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