Saver Corporation amended its defined benefit pension plan at the beginning of its 2011 fiscal year, resulting in past service costs

Saver Corporation amended its defined benefit pension plan at the beginning of its 2011 fiscal year, resulting in past service costs of $775,000. The vesting period for Saver Corporation is seven years. The plan amendment is attributable to the following employees:

Employees with more than seven years’ service as at Jan. 1, 2011……..$475,000

Employees with less than seven years’ service as at Jan. 1, 2011………$300,000

The average period until vesting for the employees with less than seven years’ experience is 3.5 years. Calculate the past service cost that will be included in the fiscal 2011 pension expense.

Pension Expense for 2011 related to past service costs:

Immediate recognition for vested employees:	$475,000
Amortization of costs for non-vested employees*:	$85,714
Total 2011 pension expense for past service costs	$560,714

*

Past service costs - non-vested employees:         $300,000

Average years until vesting                        ÷  3.5

Amortization per year                                                                                                                   $85,714

Petey Ltd. has a policy of obtaining an actuarial pension valuation every three years. Based on the individual components of its annual pension expense, Petey Ltd.’s accrued benefit obligation as at December 31, 2011, was $356,700.

An actuarial valuation revealed that the accrued benefit obligation is actually $388,000. The difference is mostly the result of revised estimates given the recent stock market troubles. Discuss the options available under IFRS to account for the actuarial loss.

Based on the actuarial report, there is a $31,300 actuarial loss.  There are two options available under IFRS to account for this loss:

·         The $31,300 can remain unrecognized until the total unrecognized gain/(loss) exceeds the corridor amount (i.e., defer and amortize)

·         The entire $31,300 can be recognized immediately in other comprehensive income, rather than net income.