Pension expense

CFA Level II FRA
#1

Can someone confirm if below statement is correct?

If we are supposed to calculate pension expense, it does include amortization of past service cost as well as corridor amortization whichever is applicable.

Thanks,

#2

Under US GAAP, yes.

#3

not a clue what corridor amortization is. then again, I can’t remember heteroskedasticity either

#4

sorry, but I don’t understand “corridor approach”. Can u explain it for me?

#5

The corridor approach :

Under US GAAP, at the beginning of the year you compare the accumulated actuarial gain/loss to the PBO or plan assets (whichever is larger, probably the PBO in real life); if the accumulated gain/loss doesn’t exceed 10% of the PBO or plan assets, you don’t amortize it, but if it does exceed 10% of the PBO or plan assets, you do amortize it.

In many respects it is different from heteroskedasticity.

#6

thanks for making me laugh, S2000

#7

My pleasure.

#8

Tks S2000 so much.

#9

You’re welcome.