can someone explain the question 23 from the morning mock exam pls?
Under US GAAP we have to calculate the amount of periodic pension cost reported in the P&L.
The answer is: Current service cost 1,151 + Interest cost on the obligation 5,441 - Expected return on plan assets 4,597 + Amortization of past service cost 272 = 2,267
But what about the Actuarial gains and losses including differences between the actual and expected returns on plan assets (page 80 form Kaplan) that is immediately recognized in the P&L or more commonly recognized in OCI and subsequently amortized to P&L using the corridor or faster recognition method?
Actuarial gains and losses typically go to OCI under both US GAAP and IFRS. Under US GAAP they can go to Pension Expense on the income statement, but I’m quite sure that nobody ever does that.
Under US GAAP they’re amortized using the corridor method; under IFRS they’re not amortized.
referring to 17 from the afternoon mock exam 2017: If Shah adopts the economic perspective (versus the traditional approach for determining CFO) as explained to Zhang for Pension plan A, the CFO will most likely be:
a.unchanged
b.higher by $1,838
c.higher by $588
So, we know that when the employer`s contributions for the year are greater than the total periodic pension cost, the excess goes to CFF as it must be seen like a principal payment on our debt. Therefore, the CFO goes up due to lower amounts classified in operations.
The answer gives the following:
University contributions $3,150
Total pension expense $ 2,562
Excess payment over expense $588
What bothers me is the wording “Net retirement expense for the year” which is actually the Total periodic pension cost, but the way it is given is confusion because the “periodic pension cost” (expense) is that part of the “total periodic pension cost” that is reflected in the P&L.
On the other hand, if I try to calculate the Total periodic pension cost = change in funding status + contributions, I cannot get the same figures.
I don`t know if you have access to this question (probably yes), if not, will provide it to you.