Intermediate Accounting, Tenth Canadian Edition, Volume 2

Chapter 19

Pensions and Other Employee Future Benefits

OVERVIEW

Employee future benefits discussed in this chapter include (1) post-retirement plans, such as pensions, that provide benefits after an employee's retirement; (2) post-employment plans that provide benefits after an employee's employment but before retirement; and (3) plans covering accumulating and vested compensated absences. Employee future benefit plans are generally either defined contribution plans or defined benefit plans. Under a defined contribution plan, the employer's obligation is limited to amounts to be contributed according to the plan. Under a defined benefit plan, the benefits to be received by the employee in the future or the method of determining those benefits is specified in the benefit plan, and the benefits often vest after the employee has worked a specified number of years. As such, the employer's obligation to pay benefits in the future on account of services provided by its employees up to the statement of financial position date must be estimated (by an actuary). Recognition and measurement of the employer's defined benefit obligation (or accrued benefit obligation) and the plan assets under a defined benefit plan is complex, with specific recognition and measurement requirements under IFRS, and different recognition and measurement options available under ASPE. In this chapter, accounting for defined benefit plans is discussed extensively, with a focus on defined benefit pension plans. ...