Corridor Rule

AAA

DEFINITION of 'Corridor Rule'

In financial accounting, the corridor rule is a materiality rule that requires disclosure of a pension actuarial gain or loss, if the gain or loss exceeds 10% of the greater of the Pension Benefit Obligation (PBO) or the fair value of plan assets. If this is the case, then the corridor rule allows this actuarial gain or loss to be amortized gradually over time into the income statement.

INVESTOPEDIA EXPLAINS 'Corridor Rule'

Overall, the corridor rule can be seen as having a smoothing effect with respect to reporting pension gains and losses. The corridor rule was established under FASB Statement 87 in December, 1985. According to this statement, the prior accounting standards for pension reporting were too weak, and resulted in inconsistent reporting methods between companies, and sometimes even different methods from one period to the next.

RELATED TERMS
  1. Accumulated Benefit Obligation

    An approximate measure of a company's pension plan liability. ...
  2. Funded Status

    The status of pension plan that has accumulated assets that have ...
  3. Pension Benefit Obligation - PBO

    An accounting term used to describe the amount of money a company ...
  4. Pension Shortfall

    A situation in which a company offering employees a defined benefit ...
  5. Pension Fund

    A fund established by an employer to facilitate and organize ...
  6. Deferred Tax Asset

    A deferred tax asset is an asset on a company's balance sheet ...
Related Articles
  1. An Overview Of The Pension Benefit Guaranty ...
    Retirement

    An Overview Of The Pension Benefit Guaranty ...

  2. Is Your Defined-Benefit Pension Plan ...
    Retirement

    Is Your Defined-Benefit Pension Plan ...

  3. The Investing Risk Of Underfunded Pension ...
    Retirement

    The Investing Risk Of Underfunded Pension ...

  4. Lump Sum Versus Regular Pension Payments
    Retirement

    Lump Sum Versus Regular Pension Payments

comments powered by Disqus
Hot Definitions
  1. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  2. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  3. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  4. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  5. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  6. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
Trading Center