CANADA - Organisations are posting significantly varied pension expense amounts, affecting their profits and taxes, according to a joint survey by Watson Wyatt Canada and Financial Executives International (FEI) Canada.
The survey of more than 160 Canadian organisations with defined benefit pension plans examined the financial impact of the accounting methods, as well as assessing how the latest accounting guidelines for pensions and post-retirement benefits - Canadian Institute of Chartered Accountants (CICA) Handbook Section 3461 - have been implemented.
While CICA 3461 has greatly improved the comparability of pension expense amounts as reported on financial statements from one organisation to another, there is still considerable leeway for organisations to adjust these numbers up or down, said Paul Christiani, retirement practice leader at Watson Wyatt in Toronto.
Christiani added that organisations need to know what assumptions are being used elsewhere and how these apply to their own organisation, given economic fluctuations and trends.
The study shows a wider than expected divergence in the discount and salary inflation rates being used, said Harvey Naglie, president of FEI Canada.
This can ultimately mean the difference between reporting a profit or a loss.”
He added: “The variance between the assumptions used and the actual economic indicators we are seeing is cause for concern as many of the organisations were still using fairly optimistic rates.
“Given recent events, however, many may need to revise their approach.
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