You are the controller of a newly established technology firm that is offering a new pension plan to its employees. The plan was established on January 1, 2011, with an initial contribution by the employer equal to the actuarial estimate of the past service costs for the existing group of employees. These employees are expected to continue to work for the firm for 20 years, on average, prior to retirement. This benefit vested in two employees immediately at a cost of $20,000. The remaining $55,000 was for employees with an average of five years remaining until the benefits are vested.
The company is considering going public in the next five years, and the president has asked you to keep her aware of the accounting changes in moving from PE GAAP to IFRS. She wants to be sure that the company always chooses the accounting policies that are closest to IFRS so that changes in the future when the company goes public will be minimized. In addition, she is interested in demonstrating a history of profits so that the company can be taken public success fully. The following information is available for you to work with.

Instructions
(a) Without using the pension work sheet, determine the funded status of the plan and the amount reported on the balance sheet at each year end, and the pension expense for each of the three years using the immediate recognition approach under PE GAAP.
(b) Without using the pension work sheet, determine the funded status of the plan and the amount reported on the balance sheet at each year end, and the pension expense for each of the three years using the deferral and amortization approach under IFRS.
(c) Explain the differences between the two approaches and make a recommendation to your employer about which approach should be used.

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2011 2012 2013 Fair value of plan assets, beginning of year ABO for funding purposes, begin ABO for accounting purposes, beginning of year Current service cost for year Interest on the liability Past service costs granted Expected earnings on plan assets Actual earnings on plan assets Employer contributions for the year Benefits paid to retirees by trustee $75,000 70,000 75,000 12,000 8% 75,000 8% 6,500 12,000 ning of year $13,000 8% $12,500 8% 8% 10,000 15,000 4,000 8% 8,000 12,000 5,000