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Recognition of all past service costs is required at the earlier of when a plan amendment occurs or when the entity recognizes related restructuring costs (in the event of a curtailment). Unvested past service cost may not be spread over a future service period.
4.4.1 Prior service cost to be recognized in a curtailment. The theory behind recognition of prior service cost when a curtailment occurs is because the work force has been reduced or the accrual of benefits for some or all future services has been eliminated.
23 Μαΐ 2024 · Under certain accounting standards, the unamortized portion of prior service cost is reported in other comprehensive income (OCI) until it is recognized in the income statement. This treatment ensures that stakeholders are aware of the potential future impact on earnings, even if the cost has not yet been fully realized in the income statement.
The concept of delayed recognition of many gains and losses arising during the ordinary operation of a pension plan is a foundational concept in pension accounting. In addition, ASC 715 provides for delayed recognition of the cost of retroactive plan amendments (prior service cost).
Introduction. 1. The IFRIC has received a request for an Interpretation giving guidance on whether plan amendments that reduce benefits are accounted for as curtailments or as negative past service costs. Existing literature. 2. The definitions in IAS 19 are as follows: Past service cost.
Basically, SFAS 87 requires the recognition of pension expense, which consists of the following items: service cost; interest cost; expected return on plan assets; amortization of unrecognized prior service costs; amortization of unrecognized transition obligations (or assets); and amortization of unrecognized actuarial gains and losses.
FAS 87 requires recognition of pension costs over the period a participant renders service to the reporting entity and recognition of a liability for unfunded costs. It also permits the recognition of an asset when the pension plan is over funded (i.e., plan assets exceed plan liabilities).
