What is the corridor in pension accounting?

The corridor is 10% of the greater of the PBO or the market-related value (smoothed) of plan assets. Actuarial gains and losses within the corridor are not amortized, providing income statement smoothing. Only the excess above the corridor is amortized into pension expense over the average remaining working lifetime.

Can companies use faster amortization than the corridor method?

Yes. ASC 715 allows companies to elect immediate recognition of all actuarial gains/losses (mark-to-market pension accounting), which eliminates the AOCI corridor but creates volatile annual pension expense. Some large companies (AT&T, Honeywell) have adopted this approach for transparency.

Pension Corridor Method Amortization

Apply the corridor method to determine pension actuarial gain/loss amortization: excess of accumulated gain/loss above 10% of the greater of PBO or market-related value of assets is amortized over the average remaining service period.

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Frequently Asked Questions

What is the corridor in pension accounting?

Can companies use faster amortization than the corridor method?