Questions on Reading 24: Understanding Pensions Posted by: boston_level2_candidate (IP Logged) [hide posts from this user] Date: April 10, 2008 04:07AM For Question 5 on page 144: 5. The amount of pension expense (income) reported on EDC’s US GAAP income statement for the year ended 30 April 2006 is: a. -19 b. -7 c. -5 d. 33 The correct answer is (b)$-7. However, I noticed that the date is “30 April 2006”, and problem 4 uses this same date, and they used a different methodolgy. For problem 4, they eliminated all the unrecognized gains/costs/transition assets. For problem 5, OTOH, they simply used the figures given at the very bottom of the “COMPONENTS OF NET PERIODIC PENSION BENEFIT (INCOME) EXPENSE”, without eliminating the unrecognized prior service costs/netAssets. Why is this adjustment not made here, but it was made in question 4? When do you know to make the adjustment?
Posting the complete question may help us answer you. As someone else said in another thread, not everyone has their books handy at all times.
Here’s the information as it appears in the book, and the information is truncated a bit to only include the pertinent information. COMPONENT OF NET PERIODIC PENSION BENEFIT (INCOME) EXPENSE YEAR ENDED 30 APRIL 2006 ---------------------------------------------------------------------------------------------------------------- Service Cost $12 Interest Cost $21 Expected return on plan assets ($38) Amortization of: Unrecognized prior services cost $1 Unrecognized net asset ($3) ------------------------------------------------------------------------------------------------------------------ Net Periodic Benefit (income) exp. ($7)
This is why you need to post up the whole question. Question 4 says: If the FASB’s new pension standard had been effective on 30 April 2006… RTFQ.
Chrismaths, I love you I love you I love you! I’m serious brother! I was very depressed and this problem had been on my mind big time!!! Thanks so much. chrismaths Wrote: ------------------------------------------------------- > This is why you need to post up the whole > question. > > Question 4 says: If the FASB’s new pension > standard had been effective on 30 April 2006… > > RTFQ.
But wait a minute…the new standard only applies to companies after dec. 15th 2006 if public. Please clarify for problem 5.