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Why does total outflow consist of only Employer contributions? Why not Benefits paid?
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What is pension expense?
I suppose that that depends on what you mean by “total outflow”. From whom? Total outflow from the sponsoring company is their contribution to the pension assets. Total outflow from the pension plan is the benefits paid.
It’s the portion of the pension cost that appears on the income statement.
Under IFRS, pension expense is:
- Current service cost
- Plus past service costs
- Plus net interest expense
Under US GAAP, pension expense is:
- Current service cost
- Plus interest cost plus
- Plus amortization of past service costs
- Plus/minus amortization of actuarial losses/gains
- Minus expected return on plan assets
I wrote an article on pension cost and pension expense: http://financialexamhelp123.com/pension-cost-and-pension-expense/
(Full disclosure: as of 4/25/16 there is a charge to read the articles on my website. You can get an idea of the quality of the articles by looking at the free samples here: http://www.financialexamhelp123.com/sample-articles/.)
Thanks a lot.
So, pension expense is periodic pension cost (P&L)
Pension expense is the portion of pension cost that appears on the income statement; it’s not the total pension cost.
Regarding the past service cost. How is that written in the period it occurs at the following period?
I know its only under US GAAP it is amortized.
Example:
In pperiod 1. Past Service cost = 100 amortized over 5 years. We write 100 in OCI and amortize 20 in P&L.
What about period 2? Is OCI then reduced to 80 and we amortize 20 in P&L again?
Anyone able to answer my bottom comment?
Would be much appreciated.
Bump.
Hi magician,
I might be mistaken, but in my Schweser notes, under IFRS, pension expense includes minusing expected return
Could I be missing something? Hope to hear from you - thanks!
This is already included in net interest expense.
That is for US GAAP.