12/30/2023 0 Comments Periodic expenses![]() Scenario A: Assumptions and Reported Amounts for the Country’s Post-Employment Health Care Benefit Plans The following are the post-employment health care plan disclosures for the companies. ![]() Each company has employees for whom they provide post-employment healthcare benefits. Example 1: Comparison of Assumptions about Trends in a Hypothetical Country’s Health Care CostsĬonsider two companies, Dudley Ltd and Bartley Ltd. A later year in which the ultimate health care cost trend is assumed to be reached.A higher assumed ultimate healthcare cost trend rate. ![]() A higher assumed near-term increase in healthcare costs.The future inflation rate is called the ultimate health care trend rate.Įach of the following assumptions would lead to a higher benefit obligation and a higher periodic cost holding everything else constant: Under IFRS, they may treat some portion of contributions as a financing activity rather than an operating activity.Ĭompanies with other post-employment benefits also disclose information about the benefits assumptions made to estimate the expense and the obligation, e.g., assumptions about the fluctuations in the inflation rate for health care costs. Under US GAAP, companies treat contributions as an operating activity. However, under IFRS, the components of the periodic pension costs in P&L can be included in various line items. Under US GAAP, a company reports all of the components of pension costs in the P&L in operating expenses on the income statement. Reporting of the Periodic Pension Costs in P&L The analyst has to adjust them for comparison purposes. US GAAP Method of Recognizing Pension ExpensesĪctuarial gains/loss and past service costs are treated separately under US GAAP and IFRS. Adjustments to include gross amounts change specific financial ratios such as debt to equity ratio. Net Reporting of Pension Assets & LiabilitiesĬompanies recognize amounts in the balance sheet as net amounts. Therefore, a company that uses a higher discount rate as compared to its peers may indicate a less conservative bias. Recall that a company with a higher discount rate results in a lower estimated pension obligation. Assumptionsĭifferent companies make different assumptions, e.g., different discount rates, and this affects comparisons across companies. Assumptions and estimates made when calculating pension-related amounts can affect comparative financial analysis using some ratios based on financial statements.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |