Question

Which of the following is false regarding the accounting for pensions under IFRS and U.S. GAAP?

a. Prior service cost is recognized on the balance sheet under U.S. GAAP only.
b. Under U.S. GAAP companies must amortize actuarial gains and losses over the expected service lives of employees.
c. Prior service cost is amortized into income over the expected service lives of employees under U.S. GAAP only.
d. Under IFRS companies may recognize actuarial gains and losses in income immediately.

Answer 1

The false statement regarding the accounting for pensions under IFRS and U.S. GAAP is option (b).

Step-by-step explanation:

The false statement regarding the accounting for pensions under IFRS and U.S. GAAP is option (b). Under U.S. GAAP, companies are required to amortize actuarial gains and losses over the average remaining service lives of employees, not the expected service lives. Whereas under IFRS, companies have the option to either amortize these gains and losses over employees' expected remaining service lives or recognize them in income immediately.