Asked Jan 25, 2020

Describe the accounting for actuarial gains and losses


Expert Answer

Step 1

Actuarial Gains and losses arises due to the difference in the pension payment made by the employer and the expected amount. The expected amount of pension is computed by considering certain assumptions like employment tenure, inflation, etc. This expected amount is accounted for in the book as an estimate payable, a difference arises at the actual payment time. In case the amount paid is less than the estimated payment, then it is gain and in case the amount paid is more than the estimated payment, then it is a loss.

Step 2

 As per US GAAP-

Accounting standard codification 715 does not require the recognition of actuarial gain or loss in the year in which it arises. It permits immediate recognition of gain or loss as a part of net periodic pension cost only if the company follows such method consistently and applies the gain or loss effect to both assets and liabili...

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