on CFA curriculum volume 2, page 142 Question 30. if actual return on plan assets had been 15% for 2008, the impact on reported pension expense and plan assets for 2008 would be (the expected return on 2008 is provided as 10%) —I know the plan assets should be increased because plan asset is calc on the ACTURAL return --but the pension expense is not affected? even we use EXPECTED return for it, the difference between ACTURAL RETURN and EXPECTED RETURN would affect “amortized deferred gain and loss” so that the pension expense is also affected, right?? I also note there is 10% rule to judge the recognized cost of each reporting period, however, the explanation included in the answer does not mention it… Appreciate your help to explain…
The expense uses the expected return, the difference as you said goes in as part of equity and will be ammortised. The ammortisation on the extra gain this year will begin next year, so pension expense is the same this year, but next year will be lower as part of the 5% gain will be recognised.
thanks! I got it!