Delmar Manufacturing Inc. is a provincial manufacturer of electronics. It has been in operation for over 25 years under ownership of the same two private shareholders. It has always offered its employees a very generous defined benefit (DB) pension plan as part of the compensation package. Delmar has recently undergone expansion, and in the last quarter of this fiscal year opened a new manufacturing plant in another province. As a result it also created a new DB pension plan for the employees of the new plant. Some of the employees at the new plant are current employees who were already participating in the existing DB pension plan and others are new employees recently hired and will be new to Delmar's pension plan. Existing employees were transferred into the new plan before the end of the fiscal year.

A review of the pension transactions for 2013 revealed the following:

1. For 2013, the service cost for Delmar employees is projected by the actuary to be $236,000. The current service cost is credited at the end of each fiscal year. Nothing has been recorded in the financials to reflect this.

2. The actuary has reviewed the new plan and determined that the past service costs for existing employees is $96,000 (a cumulative total over the period of the last 20 years). Delmar has not yet reflected this in its current results and is unclear on how to accurately reflect this in its financial statements. Delmar employees would be eligible for full benefits after a two-year vesting period.

3. Delmar's current borrowing rate and settlement rate is 8%. Delmar's management has specifically eliminated the option of purchasing an insurance contract for the future settlement of its pension liability. The current interest rate on high-quality corporate bonds is 9% and the pension committee has identified an expected rate of return of 10% on the plan assets.

4. The plan paid only $34,000 in benefits to its retirees for 2013 and Delmar contributed $88,000 to the plan throughout the year.

5. Due to declining economic conditions, the actuary has revised its assumption for age of retirement and final salary. This has resulted in an actuarial loss of $55,000. Delmar must also account for an actuarial loss of $19,000 resulting from differences in past assumptions and actual costs (experience losses). This has not yet been accounted for in the statements.

6. The actual return on plan assets was $16,500, significantly lower than projected.

7. The defined benefit obligation as determined by the actuarial valuation for funding purposes is equal to the defined benefit obligation used for accounting purposes. The fair value of the plan assets was $980,000 at the end of 2012.

Excerpts from Delmar's financial statements are provided below, prepared under ASPE using the immediate recognition approach.

Instructions
Delmar Manufacturing Inc.'s management is reviewing its current pension accounting in preparation for an upcoming meeting with the board of directors and its pension committee. Complete the necessary calculations needed to record the ending net accrued benefit obligation or asset following ASPE and using the immediate recognition approach. Management does not plan to change this accounting policy. In addition, assume the role of a consultant and discuss the financial reporting issues, particularly the implications for the financial statements and the differences in reporting and presentation under IFRS and ASPE. Provide guidance on which method would be preferable for Delmar.

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2012 2013 Total current assets Fixed assets, at net book value Total current liabilities Long-term debt $ 2,078,900 $ 2,044,900 14,010,200 773,000 333,800 11,700,900 822,400 345,900 2,165,000 Net accrued benefit obligation Operating profit 1,890,000 1,345,000 Other revenue and other expenses Costs-Expansion (manufacturing facility) Interest expense 58,000 390,000 937,300 777,000 482,000 $55,900 Net income