Actuarial Gains and Losses

Leveraged buyout IFRS 3 best reporting

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Leveraged buyout IFRS 3 best reporting – In corporate finance, a leveraged buyout (LBO) is a transaction where a company is acquired using debt as the main source of consideration. These transactions typically occur when a private equity (PE) firm borrows as much as they can from a variety of lenders (up to 70 or 80 percent of the purchase price) and funds the balance with their own equity. Leveraged buyout IFRS 3 best reporting 1 The process and business reason The use of leverage (debt) enhances expected returns to the private equity firm. By putting in as little of their own money as possible, PE firms can achieve a large return on equity (ROE) and internal rate of return … Read more

IFRS vs US GAAP Employee benefits

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IFRS vs US GAAP Employee benefits

The following discussion captures a number of the more significant GAAP differences under both the impairment standards. It is important to note that the discussion is not inclusive of all GAAP differences in this area.

The significant differences and similarities between U.S. GAAP and IFRS related to accounting for investment property are summarized in the following tables.

Standards Reference

US GAAP1

IFRS2

715 Compensation – Retirement benefits

710-10 Compensation- General – Overall

712-10 Compensation – Nonretirement Postemployment Benefits – Overall

IAS 19 Employee Benefits

IFRIC 14 The limit on a defined benefit asset minimum funding requirements and their interaction

Introduction

The guidance under US GAAP and IFRS as it relates to employee benefits contains some significant differences with potentially far-reaching implications.

This narrative deals with employee benefits provided under formal plans and agreements between an entity and its employees, under legislation or through industry arrangements, including those provided under informal practices that give rise to constructive obligations.

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Presentation and disclosure

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Presentation and disclosure are the terms used to describe how information about assets, liabilities, equity, income and expenses is provided in the accounts.

Other comprehensive income

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Other comprehensive income comprises items of income and expense (including reclassification adjustments) that are not recognised in profit or loss as required or permitted by other IFRSs.

Reclassification adjustments

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With an increase in the use of fair value measurement in the financial position, there was a need to separate realised gains and losses from unrealised gains and loss. Realised gains and losses (using accrual accounting) are include in profit or loss. Unrealised gains and losses in other comprehensive income.

Post-employment benefits

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Post-employment benefits are employee benefits (other than termination benefits and short-term employee benefits) that are payable after the completion of employment.

Key assumptions in a Pension plan

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Key assumptions in a Pension plan – There are two types of pension assumptions that a sponsor makes with input from their actuaries: Economic assumptions describe how market forces affect the amount of expected future benefits to be paid to plan recipients. Demographic assumptions describe the impact of plan-participant behaviours on the timing and probabilities of benefits being paid to them. In (consolidated) financial statements the following actuarial assumptions that the company/ sponsor used to estimate its portion of benefit obligation and pension expense under the pension plan. The economic assumptions relate to: discount rate; expected rate of return on plan assets; Key assumptions in a Pension plan salary escalation rate; and Key assumptions in a Pension plan inflation rate. … Read more

Components of a company’s pension liability

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Components of a company’s pension liability – A company’s defined-benefit pension plans have three basic components: accrued-benefit obligations, or the future liabilities created by employees’ service; plan assets, used to pay pension benefits; and unamortized actuarial gains and losses. Setting aside unamortized actuarial gains and losses, when plan assets are less than the accrued benefit obligation, a net pension liability is recorded on the statement of financial position. A net pension liability is the estimate of the amount needed to pay for pension benefits that have been earned by current and past employees, less the pool of assets set aside in a separate legal entity to eventually pay for the benefits. A net pension asset arises when plan assets are … Read more