What method to report may increases Net Pension Liability (NPL) by a lower amount when there is an actuarial loss, IFRS or US GAAP?
Solution
When a company has a pension plan for its employees, sometimes the estimated costs of that plan change. This can happen because of things like changes in interest rates or how long people are expected to live. These changes can lead to what’s called an actuarial loss. Now, the way companies report these losses can be different depending on whether they use IFRS (International Financial Reporting Standards) or US GAAP (U.S. Generally Accepted Accounting Principles). This difference affects how a company’s net pension liability (NPL) looks on its financial statements.
Think of it like this: Imagine a company has a piggy bank (the pension plan) where they’re saving money for future employee pensions. If they suddenly find out that they need to put more money into the piggy bank than they thought (because of an actuarial loss), the way that extra money is shown on the company’s financial statements depends on whether the company follows IFRS or US GAAP. …Please click on the Icon below to purchase the FULL ANSWER at only $3