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IFRS REPORTING ON COCA-COLA AND PEPSI 4

IFRSReporting On Coca-Cola and Pepsi

Inorder to determine whether a pension schemes plan is a loss or aprofit, companies have to use the international financial reportingstandards (IFRS), Deloitte (2014). IFRS standards are important inrevealing whether a company’s pension plan has an overdrive infunding or whether the plan isunderfunded.Pension is the steady income that most people receive when theyretire from their jobs. In 2009, PepsiCo and coca-cola, which are thetwo leading beverage producing companies, came up with differentpension plan packages for their employees.

In2009, executive managers at Coca-Cola opted to diverting fromgovernmentalset constitutional pension funding approach to cash balancereporting.Through this shift in pension funding, Coca-Cola succeeded inminimizing its risks while also securing its employee benefits. Whencompared to previous pension plan approach, the cash balancereporting proved to have an instant impact as workforce mobilityincreased and career benefits ended up accruing. Cash balancereporting gave employers the power of creating new cash flow systemsas they did not have to fear litigationagainst them. Comparative to the previous financial year, cashbalance reporting also resulted in increased companyrevenue thus proving to be a better risk taken by Coca-Cola Companyexecutives.

Onthe other hand, PepsiCo decided on adopting a new strategy ofoffering final pension salaries to its new employees, this approachset to benefit both employees and their families upon retirement. Thenew pension plan included retired employee benefits and medical feesthat werecompoundeddifferently. Although this new approach is still in use today, itrequired a pension plan that was high quality in order to secureretirement plans for old and newly employed workers. Compared withthe Pepsi’s previous year net sales, this new approach resulted ina decline of the company’s net sales.

Whencomparing both approaches undertaken by the two companies, it can benoted that IFRS approach undertaken by Coca-Cola Company has betterresult since both the companyand its employees ended up profiting without affecting risk levelthat has to be reported in annual financial reports

Reference

Deloitte.(2014). InternationalAccounting Standards Committee (IASC). Retrievedfrom http://www.iasplus.com/en/resources/ifrsf/history/resource25.