Hunt Corporation had an accrued benefit obligation of $3.1 million and plan assets of $3.3 million at January 1, 2011

Hunt Corporation had an accrued benefit obligation of $3.1 million and plan assets of $3.3 million at January 1, 2011. Hunt’s unrecognized net actuarial loss was $475,000 at that time. The average remaining service period of Hunt’s employees is 7.5 years. Calculate Hunt’s minimum amortization of the unrecognized actuarial loss for 2011.

Unrecognized net actuarial loss                   $475,000    

Corridor (10% X $3,300,000)                        330,000    

Excess                                             145,000    

Average remaining service life                    ÷    7.5

Minimum amortization                              $ 19,333  

On January 1, 2011, Tuesbury Corporation amended its defined benefit pension plan, resulting in $1,125,000 in past service costs. Tuesbury Corporation expects to receive economic benefits, through increased employee productivity and morale, over the next 15 years, at which point the employees will be eligible for their full pension benefits. Currently, all employees who are affected by the plan amendment are already vested.

Calculate the past service costs included in the pension expense for the December 31, 2011 fiscal year under the deferral and amortization method under both PE GAAP and IFRS.

Under the PE GAAP deferral and amortization approach, the $1,125,000 of past service costs is amortized to expense over 15 years, which is the expected period of benefit from the time of adoption or amendment until the employees are eligible for the plan’s full benefits.  Therefore, the portion of past service costs included in the 2011 pension expense is $75,000 ($1,125,000 / 15).

Under the IFRS deferral and amortization approach, the $1,125,000 of past service costs would be amortized to expense on a straight-line basis over the average benefit period until the benefits become vested.  In this case, all employee benefits are already vested, therefore, IFRS requires the immediate recognition of the past service costs into expense.  Therefore, the entire $1,125,000 will be included in pension expense for 2011.

Refer to BE19-10. Ignoring any differences in the actuarial valuation basis for the ABO, calculate the pension expense for Uddin Corporation assuming that it elected to apply the immediate recognition approach.

Service cost                                       $27,500

Interest on ABO                                     25,000

Actual return on plan assets                      (30,000 )

Pension expense                                    $22,500