You are the controller of a newly established technology

firm #1464

You are the controller of a newly established technology firm that is offering a new pension plan
to its employees. The plan was established on January 1, 2013, with an initial contribution by
the employer equal to the actuarial estimate of the past service costs for the existing group of
employees. These employees are expected to continue to work for the firm for 20 years, on
average, prior to retirement. This benefit vested in two employees immediately at a cost of
$20,000. The remaining $55,000 was for employees with an average of five years remaining
until the benefits are vested. The company expects to realize the economic benefits from the
change in plan over the next four years. The company is considering going public in the next
five years, and the president has asked you to keep her aware of the accounting changes in
moving from ASPE to IFRS. She wants to be sure that the company always chooses the
accounting policies that are closest to IFRS so that changes in the future when the company
goes public will be minimized. In addition, she is interested in demonstrating a history of profits
so that the company can be taken public successfully. The following information is available for
you to work with.

Instructions

(a) Without using a pension work sheet, determine the funded status of the pension plan and
the amount reported on the statement of financial position at each year end, the pension
expense for each of the three years, and the remeasurement (gain) loss recorded in OCI for
each of the three years, using the immediate recognition approach under IFRS.

*(b) Without using a pension work sheet, determine the funded status of the pension plan and
the amount reported on the balance sheet at each year end, and the pension expense for each
of the three years using the deferral and amortization approach under ASPE.

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 (c) Explain the differences between the two approaches and make a recommendation to your
employer about which approach should be used.

You are the controller of a newly established technology firm

ANSWER
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