Question

Postretirement Benefit Cost - present the provisions of this concept provided by GAAP (GENERALLY ACCEPTED ACCOUNTING STANDARD) present provisions provided by IFRS (INTERNATIONAL FINANCIAL REPORTING STANDARD) are presented.

Answer 1

US GAAP - Accounting Standard Codification (ASC) 715

ASC715-30-35-19 does not require recognition of gains and losses as component of net pension cost of the period in which they arise. However, ASC 715-30-35-20 permits immediate recognition of gains and losses as a component of net periodic pension cost if that method is applied consistently, and is applied to all gains and losses on both plan assets and obligations.

Gains and losses that are not recognized immediately as a component of net periodic pension cost shall be recognized as increases or decreases in other comprehensive income as they arise.
Thereafter, as a minimum, amortization of a net gain or loss included in accumulated other comprehensive shall be included as a component of net pension cost for a year if, as of the beginning of the year, that net gain or loss exceeds 10 percent of the greater of the projected benefit obligation or the market-related value of plan assets.
If amortization is required, the minimum amortization shall be that excess divided by the average remaining service period of active employees expected to receive benefits under the plan.
ASC 715-30-35-25 permits any systematic method of amortizing gains or losses in lieu of the minimum specified in the preceding paragraph provided that all of the following conditions are met:

The minimum is used in any period in which the minimum amortization is greater (reduces the net balance included in accumulated other comprehensive income by more).

The method is applied consistently.

The method is applied similarly to both gains and losses.

IFRS - International Accounting Standard (IAS) 19

Para 120 of IAS 19, which reads as under, requires re-measurement costs (i.e. actuarial gains and losses) to be recognized immediately and entirely in the statement of Other Comprehensive Income:
“An entity shall recognize the components of defined benefit cost, except to the extent another IFRS requires or permits their inclusion in the cost of an asset, as follows:

service cost in profit and loss;

net interest on the net defined benefit liability (asset) in the profit and loss; and

remeasurements of the net defined benefit liability (asset) in other comprehensive income.”
Further, para 122 of IAS 19, which reads as under, clarifies that remeasurements costs shall never be re-classified as profit or loss:
“Remeasurements of the net defined benefit liability (asset) recognized in other comprehensive income shall not be reclassified to profit or loss in a subsequent period. However, the entity may transfer those amounts recognized in other comprehensive income within equity”
Kindly note that the requirements of Ind AS19 notified by the Central Government under the Companies Act are at par with the requirements of IAS19 mentioned above.

Particulars AS15 AS19 US GAAP Recognition - immediate vs deferred Immediate Immediate Optional* Recognized where? Profit or Loss OCI # Initially OCI * Not Reclassification to profit or lossin case of initial recognition through OCI Never Yes, as described above Applicable