Modeling and Analyzing the IAS 19 System of Accounting for Unfunded Pensions

Abstract

In the accounting system of the International Financial Reporting Standards (IFRS) pension plans are covered by the International Accounting Standard (IAS) 19 “Employee Benefits”. As “accounting for defined contribution plans is straightforward” (IAS 19.43) we concentrate on defined benefit plans. In case of defined benefit plans, the employer has promised to make future pension payments according to a plan formula. We focus on pension plans without external accumulation of capital (unfunded plans) as we want to analyze pure accounting effects.