Final answer:
The incorrect statement is that IFRS does not separate pension plans into defined-contribution and defined-benefit plans; IFRS indeed distinguishes between these two types. Defined benefit plans promise a certain payout, while defined contribution plans depend on contributions and investment returns. Also, IFRS does recognize prior service costs, and actuarial gains and losses may be reclassified, which contradicts the statement that they are not 'recycled' into income. The correct option is C.
Step-by-step explanation:
The statement regarding the accounting for various forms of compensation plans under IFRS that is not true is: IFRS does not separate pension plans into defined-contribution plans and defined-benefit plans. In fact, IFRS does distinguish between these two types of plans.
Defined contribution plans are those in which the employer contributes a fixed amount to the employee's retirement account, such as 401(k)s and 403(b)s, and the benefits are based on the amount contributed and the returns on investment. Defined benefit plans, on the other hand, promise a specific payout at retirement and involve the employer bearing the investment risk.
While it is correct that IFRS uses smoothing provisions to dampen fluctuations in pension expenses, it should be noted that it does not recognize prior service costs immediately in the financial statements and actuarial gains and losses can be reclassified from equity to profit or loss, providing a form of 'recycling'.
Therefore, pension insurance may also be a necessary consideration for employers to ensure the benefits can be paid even if the company faces financial difficulties.