Hi This may be beyond the syllabus, but now that firms can't hold unrecognised gains/losses, will they have to have a massive SORIE item for their 2013 accounting period to get rid of it all (and if so, if it was an unrecognised gain, presumably this massively reduces the value of the liabilities and vice versa if it was a loss?), or are there transitional arrangements. Also, what was the benefit of firms holding unrecognised gains, as if they recognised them, would this not decrease reported pension cost and increase the pension asset? Were they just held as a cushion to enable volatility in accounts to be smoothed (by recognising the gain in years when pension cost would otherwise be high) and to offset future experience losses that might occur? Thanks
Transitional arrangements are in place for IAS19R such that you restate the prior year's figures and bring the opening unrecognised gains/losses on as an adjustment to retained earnings. (Essentially the balance sheet item changes, but the change does not pass throught P&L or OCI) The main reason for the corridor is an attempt at smoothing gains/losses to have some stability from year to year on the balance sheet and P&L. If you used it you have to maintain consistency between treatment of gains and losses, and from year to year. Ie you couldn't recognise gains right away in full when you needed a good profit, and spread loss over as long a period as possible.
