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net pension asset/liability

Hello,

I know for IFRS, the net interest income (expense) that is reported on the P/L is calculated as the expected rate of return * the net pension asset liability. However, in the OCI under IFRS - remeasurement is reported as actuarial gains/losses plus the difference between net interest income (expense) and the actual return on planned asset.

My question is why would (in the OCI section) would we compare the net pension asset/liability (which is the funded status) to the return on planned assets? Seems like a apples to oranges comparison.

Thanks 

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I’m not sure that I understand your question about comparing the funded status to the return on plan assets.

Under US GAAP we show interest expense equal to the discount rate times the beginning pension liability, and we show return on plan assets (essentially interest income) as expected return times beginning plan assets.

Under IFRS we show interest expense equal to the discount rate times the beginning pension liability, and we show interest income as the discount rate times beginning plan assets; we net those two to get net interest income/expense.  In essence, IFRS says that the expected return on plan assets has to be the same rate as the discount rate on plan liabilities.

By the way, it’s plan assets (i.e., the assets owned by the pension plan), not planned assets.

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Is the net pension asset/liability (in IFRS) the same as the beginning funded status of the plan?

Beginning net pension asset/liability = beginning funded status.

Simplify the complicated side; don't complify the simplicated side.

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In the exam, would the problem provide you the actual return on the plan assets?

In general, yes.

Simplify the complicated side; don't complify the simplicated side.

Financial Exam Help 123: The place to get help for the CFA® exams
http://financialexamhelp123.com/