Defined Benefit pension plan

Defined Benefit pension plan

	IFRS	U.S. GAAP
B/S	Funded status(*) - Unrecognised actuarial gains + Unrecognised actuarial losses + Unrecognised past service cost	Funded status
Different line items in I/S?	Yes	No

(*) Funded status = FV of plan assets - PV of DB obligation

Net income + Company's net periodic benefit cost (non-cash expense) - Company contributions = CFO

Service costs: estimated increase in the pension obligation resulting from employees' service during the period (and benefits earned by current employees).

Actual return on plan assets = Expected return on plan assets + Actuarial gains

Defined Benefit pension plan

Pension obligation	-	Down					Up
Expected long-term return on plan assets	Up / Down		Up			Down		Down
Discount rate		Up	Up		Down	Down
Interest cost		Down(*)
Net periodic cost (pension expense)	Down / Up	Down		Up				Up
Reported net income		Up	Up				Down	Down
CFO		-
Estimated future salary increases				Up(**)	Down		Up
Inflation				Up(**)
Recognised prior service costs							-
Net assets								-

(*) unless the pension obligation is of short duration
(**) normally
-: No change/effect

Defined Benefit Obligation

Discount Rate	Up
(future) pension expense	Down	Up	-
Benefit Obligation	Down	Up
Rate of compensation increase		Up
Actual return			> Expected return
Plan assets			Up

Defined Benefit Obligation

Expected return on plan assets	Up
Reported pension expense	Down	Down	Down
Interest cost component of the net periodic cost			Down(*)
Projected pension obligation	-	Down	Down
Compensation growth		Down
Net income		Up
FV of plan assets		-	-
Discount Rate			Up

(*) typically, except if the pension obligation is of short-term duration


Benefit obligation at end of year: total PV of all benefits (=future payments) employees have earned in the current and prior periods based on their service up until end of year, regardless of whether the benefits have vested.


Underlying economic pension expenses
= Benefit obligations (ending) - Benefit obligations (beginning) + Benefits paid
- (PV of plan assets (ending) - PV of plan assets (beginning) + Benefits paid - Employer's contribution)
= - (Funded status (ending) - Funded status (beginning) - Employer's contribution)