CFAI test #1: economic pension expense?

CFA Level II
#1

I’ve confused with their answers. according to schweser. econimic pension expense=service cost+interest cost-actual return on asset. but their answer say it’s service cost+interest cost+actual cost! Can someone explain this?

#2

anyone?

#3

The only thing I can think of is that if actual return is negative, then it becomes an actual cost. Negative returns are possible, just think 401k.

#4

oh yeah…I’m so stupid. thanks!

#5

Yup, it was a negative return. I think they would have been better served as to keep the structure of the equation the same and just show a minus the negative. Hey Schweser or CFAI, I’m available to ghost write questions and help you with these stupid mistakes. Call me.

#6

Just to be clear. Does economic pension expense mean the same thing as adjusted pension expense?

#7

I think if the economic pension expense = adjusted pension expense; in that way .econimic pension expense=service cost+interest cost-actual return on asset ( correct);

#8

thanks.

#9

Actual return on Plan Assets is? End plan assets + Benefits paid out - Contributions - Beginning Assets How do we calculate if it is overfunded or underfunded?

#10

fair value of the plan asset > PBO : overfunded fair value of the plan asset < PBO: underfunded is that what you want to know CFAdummy or did i get you wrong?