In a defined contribution plan, the employer agrees to contribute a certain sum each period based on a formula.
IFRS: Pension expense = CSC +/- PSC (amortized over vesting period)
ASPE: Pension expense = CSC +/- PSC (amortized over rational systematic way)
A defined benefit plan defines the benefits that the employee will receive at the time of retirement.
Defined Benefit Obligation (DBO): BGN + CSC + interest (opening adjusted* balance x discount rate) +/- PSC + actuary’s losses (change in assumptions) – actuary’s gains (change in assumptions) – benefits paid (page 1204). *Adjust opening DBO for any PSC amendments made near the beginning of the year
Plan assets: BGN +/- actual return + cash received from company – benefits paid (page 1206)
Actuarial gains or losses: Two Sources: 1. Change in actuarial assumptions and 2. Experience = actual – expected return on plan assets. p. 1205
Non-capitalization approach: pension plan assets and full pension obligations are NOT reported as assets and liabilities on the employer company’s balance sheet. Only the net is as follows: DBO CR Plan Assets DR Under/over funded CR/DR? DR = Asset or CR = liability
Pension expense: See examples on page 1215
Thru net income: CSC +/- 100% of PSC + interest (opening adjusted* DBO x discount rate) - expected return (opening plan assets x discount rate)
Thru Other comprehensive income (OCI): net actuarial gains or