# Calculating Period Pension Cost: CFAI Practice Problem 1-7 page 211

Working through my least favorite subject, bare with me on the dumb questions:

In the information provided for questions 1-7 on page 211 of the CFAI text, the components of period benefit cost are provided.

Trying to understand the process to calculate the net interest expense, which should be the begin PBO * the interest rate they have provided. I calculate this figure to be 255m, they provide 273m which I pressume is before any remeasurement. What exactly has been remeasured to come up with the -18m? I thought any remeasurement would be in the “actuarial gain or loss” section of the change in benefit obligation they provide.

Does the -18m mean this remeasurement happened in the prior period as an Actuarial gain or loss? Wouldn’t that mean the remeasurement is already reflected in the begining PBO? Do they call it out here so that amount can be included in OCI? Just a little confused on how they presented the information.

Really disliked my first pass through this section, like it even less now

I am just doing them

I just took my 3rd (quicker) pass through and worked these first few problems. Adding 18 to the begin PBO * the discount rate they provide, you get the \$273m. It makes more sense now, just seems like a really awkward way to provide this information

Check this thread out from last spring courtesy of bloodline: http://www.analystforum.com/forums/cfa-forums/cfa-level-ii-forum/91321052

The company is an IFRS reporter. Net Interest expense is calculated as funded status at the beginning of the year (which is given as –£4,984… or Beginning FV of 23,432 minus Beginning PBO of 28,416 = –£4,984) times the discount rate/expected rate of return of 5.48%. Net Interest expense = -4,984 x 5.48% = -273

thank you! Excellent explaination, just what I needed

immediate bookmark! Thanks!

Thanks for posting this… much appreciated!