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Dear Tutor,
Could you please explain what is meant by the following as I don’t seem to understand what the problem is with the treatment:
Under IAS 19 the interest element is recognised in P&L while the correction, (difference between actual return and interest applied) is recognised in OCI. The logic for the split is that the interest element shows the financing effect of paying for benefits in advance or arrears.
IAS 19 Could also be criticised for reporting estimated figures in profit and loss, while reporting the difference for arriving at the actual return in OCI.
Hi,
There is a huge amount of subjectivity on behalf of the actuary in measuring the fair value of the assets and liabilities, so we cannot put the movement through profit or loss as this would have huge impacts on the company’s performance on elements that it cannot control. It is therefore reasonable to put the remeasurement through other comprehensive income.
Thanks
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