Novartis, which files under IFRS, reported the following information in its first quarter report for 2013:
Impact of introducing revised accounting standard on Employee Benefits in 2013 The Group introduced the revised IFRS accounting standard IAS 19 (R) "Employee Benefits," on January 1, 2013. The principal impact of this is that the return on pension plan assets and the interest calculated on the defined benefit obligations now use the same interest rate reflecting the current market yield of high-quality corporate bonds. Previously the return on plan assets was calculated based on the higher long-term expected return on assets, so the adoption of the new accounting standard increases the annual cost of post-employment benefits included in Corporate Other Expense. It has also been required to restate for the amortization of previously unrecognized past service credits. As required by the new standard, the Group's 2012
Consolidated Financial Statements have been retrospectively restated to reflect these changes. For the full year 2012, the impact of these restatements is an additional expense of USD 318 million before tax (USD 235 million after tax) and in the first quarter of 2012 an additional expense of USD 79 million before tax (USD 58 million after tax), offset by a corresponding adjustment of the actuarial losses recognized in comprehensive income.
Required:
1. Did the adoption of the revised IAS 19 increase or decrease Novartis' annual pension expense? Why?
2. Why did Novartis have to adjust its 2012 (prior year's) financial reporting for its pensions?
3. Are there any cash flow implications of these changes for Novartis?