What is the best accounting policy for gains and losses in pensions?

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

The importance of this research is emphasized by the changes in IAS 19 proposed by the IASB in 2010. In this context, the primary objective of our analysis is to provide a comparison between the three allowed methods to account for the recognition of actuarial gains and losses, taking into consideration their value relevance for the investor, within defined benefit plans accounting. Our results provide evidence that full recognition of actuarial gains and losses in equity is more value relevant to investors than full recognition in the income statement, and than the recognized smoothed net pension liability through the corridor approach.