ASC 715, Compensation — Retirement Benefits, and ASC 712, Compensation — Nonretirement Post-Employment Benefits, and IAS 19, Employee Benefits, are the principal sources of guidance for employee benefits other than share-based payments under US GAAP and IFRS, respectively.
Under both US GAAP and IFRS, the net periodic benefit cost recognized for defined contribution plans is based on the contribution due from the employer in each period. The accounting for defined benefit plans has many similarities as well.
The defined benefit obligation is the present value of benefits that have accrued to employees through services rendered up to that date, based on actuarial methods of calculation.
Both US GAAP and IFRS provide for certain smoothing mechanisms in calculating the periodic benefit cost.
The FASB and the IASB agreed to a long-term convergence project to comprehensively challenge the accounting for postretirement benefits. This project is expected to address many of the common concerns with the current accounting model, such as the smoothing and deferral mechanisms.
The IASB project was divided into two parts. Part 1 of the project, addressing the recognition and presentation of changes in the defined benefit obligation and in plan assets, disclosures, and other related issues, was completed in June 2011 when the IASB issued amendments to IAS 19, Employee Benefits, which are effective 1 January 2013.
Current differences between US GAAP and IFRS will be affected by the IASB's amendments to IAS 19. Note that this publication does not address the differences between US GAAP and IFRS resulting from the amendments to IAS 19 because of its delayed effective date.
The second phase of the project, which will focus on improving the measurement of defined benefit plans and contribution-based plans, has not yet begun. The FASB considers the project a lower priority and does not expect further action in the near term.
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