Periodic pension cost in OCI

CFA Level II FRA
#1

Schweser. Pg.44. periodic pension cost example.

E. Contribution 1200

Current service cost 1850

Past service cost 120

PBO (Beginning) 38750

PBO (end) 43619

Actuarial loss 628

Plan assets (beg) 28322

Plan assets (end) 30682

Actual return 1795

Benefits paid 635

Unamortized actuarial losses 3150

Expected return 6%

Discount rate 7.5%

Could someone help me in calculating pension cost in OCI didectly, US GAAP and IFRS , as against deducting P&l pension cost from total cost?

#2
  1. US GAAP pension cost in OCI

= Unamortized actuarial losses + Past service cost

= 3150+ 120

  1. IFRS pension cost in OCI

= actuarial losses +/- difference in actual and expected return

= 628 - 95.68

What am I missing in both?

#3

Try This:

US GAAP:

OCI = Actual Return - (Plan Assets * Expected Return) + Unamortized Actuarial Loss + Unamortized Past Service Costs

IFRS:

OCI = Actual Return - ( Discount rate * Plan Assets) + Actuarial Losses

#4

Hey, I’m having the same problem did you ever get an answer?

#5

Correct. Another key difference, USGAAP uses corridor approach for actuarial G/L amortization while IFRS doesn’t.

#6

This doesn’t give me the answers as mentioned in Schweser.

#7

USGaap:

Actuarial loss: 628

Actual minus Expected: 1795 - 1699 = 96 (Actuarial gain)

Past service: 120

Periodic OCI: 628 - 96 + 120 = 652

Or

Periodic pension cost in OCI (U.S. GAAP) = € 3,709 (tppc) – € 3,057(p&l) = € 652

The key: formula is used to find periodic OCI, not the total OCI. Ignore unamortized numbers as they are from last periods.

#8

IFRS:

Actuarial losses: 628

Actual minus Expected: 1795 - 2124 (using 7.5% discount) = -329 gains

Periodic OCI: 628 - (-329) = 957

Or

Periodic pension cost in OCI (IFRS) = € 3,709(tppc) – € 2,752 (P&l)= € 957