Jack Kelly Company has grown rapidly since its founding in 2006. To instill loyalty in its employees, Kelly is contemplating establishment of a defined benefit plan. Kelly knows that lenders and potential investors will pay close attention to the impact of the pension plan on the company's financial statements, particularly any gains or losses that develop in the plan. Kelly has asked you to conduct some research on the accounting for gains and losses in a defined benefit plan.
Instructions
Access the IFRS authoritative literature at the IASB website (eifrs.iasb.org/) (you may register for free elFRS access at this site). When you have accessed the documents, you can use the search tool in your Internet browser to respond to the following questions. (Provide paragraph citations.)
a. Briefly describe how pension gains and losses are accounted for.
b. Explain the rationale behind the accounting method described in part a..
c. What is the related pension asset or liability that may show up on the statement of financial position? When will each of these situations occur?