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Pension provisions IFRS | Tax effect

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Pension provisions IFRS | Tax effect

  • This topic has 1 reply, 1 voice, and was last updated 4 years ago by AccountingBear.
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  • March 15, 2021 at 6:41 pm #614486
    AccountingBear
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    Hi guys,

    By linking accounting and rating I came across an interesting fact. Rating agencies like S&P seem to account for a pension deficit (Plan assets < DBO), deducting a “tax effect” by simply multiplying the pension deficit with (1-effective tax rate) when looking at total debt.

    My understanding so far was that service costs (current and past) and net interest costs are charged to the P&L directly and thereby reduce the taxable income. In addition, re-measurements of DBO are charged to OCI – tax effect reported but booked in deferred tax assets / liabilities, correct?

    So it is unclear to me how one could explain the “tax effect” of a pension deficit that is recognized by S&P?

    This should be related to the timing of recognition of taxes in the cash flow statement.

    Would highly appreciate your help!

    Best,
    Jonathan

    March 17, 2021 at 6:21 pm #614619
    AccountingBear
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    Anyone?

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