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5.11 Curtailments
Publication date: 30 Nov 2022
us IFRS & US GAAP guide
A number of differences exist in relation to how curtailments are defined and how both curtailment gains and losses are calculated (in light of the differences in the underlying accounting for gains/losses and prior service cost).
Additionally, when a curtailment is caused by employee terminations, the timing of recognizing a loss differs.
There are additional differences in the timing of the recognition of gains or losses related to plan amendments, curtailments, and termination benefits that occur in connection with a restructuring.
US GAAP | IFRS |
A curtailment is defined as an event that significantly reduces the expected years of future service of present employees or eliminates for a significant number of employees the accrual of defined benefits for some or all of their future service.
Curtailments resulting from employee terminations are recognized when the curtailment is probable and reasonably estimable for losses, but when the termination occurs for gains.
Curtailments resulting from plan terminations or amendments are recognized when realized (i.e., once the plan amendment is adopted).
The guidance requires certain offsets of unamortized gains/losses in a curtailment but does not permit pro rata recognition of the remaining unamortized gains/losses.
| The definition of a curtailment is limited to “a significant reduction by the entity in the number of employees covered by a plan.”
Curtailment gains and losses should be recorded when the curtailment occurs.
IFRS requires the gain or loss related to plan amendments, curtailments, and termination benefits that occur in connection with a restructuring to be recognized when the related restructuring cost is recognized, if that is earlier than the normal IAS 19 recognition date.
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