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Doubt regarding illustration:
”As any past service cost does not consider the effect on the asset ceiling, a gain on settlement of $3 million should therefore be recognised in profit and loss.”
Hello Sir, I hope you are doing good.
I do understand that curtailment losses/gains go to P&L, however. I don’t understand the relationship of past service costs and asset ceiling mentioned above please explain what that phrase means…..I’m not going to be much help here as this issue is bigger than my brain. All I can gather is that the standard writers felt that allowing past service cost to affect asset ceiling could have a very significant impact, and so they voted against it. The discussion is here:
https://www.ipe.com/iasb-approves-asset-ceiling-service-cost-amendments-to-ias-19/10006458.article
I think the examiner wrote this to give us something to think about while the epidemic raged.
As far as the article goes don’t worry about the horrible word document with numbers all over the place, but see if you can agree the remeasurement difference of 1840. That will surely put you in prize winner corner.
If I have any more thoughts I will post them.
Hey @tinkle i think this is a brilliant question! I thought i understood pensions all too well, until of course i bumped across your question. Thanks for raising this question!
I personally think that asset ceiling should increase if there is a gain on settlement. because if asset ceiling is defined as “PV of future economic benefits arising as a result of having to make reduced contributions and cash refunds” then in that case asset ceiling will rise as “future contributions payable into the scheme will reduce by $3m (due to recent gain on curtailment)”.
So, i essentially assumed that asset ceiling figure of $11m is already adjusted for gain on settlement.
As far as actuary’s figure of net pension asset of $12m(i.e.148-136) is concerned i don’t think its either adjusted for curtailment, or should be affected in any way. Because actuary basis its assumptions of pension asset or liability on the grounds of no.of employees, their final salaries, their life expectancy etc.
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