Econ. pension expense (Schweser vs text)

CFA Level II
#1

Just a quick question… Schweser q-bank keeps telling me the formula for economic pension expense is : Service cost + interest cost - actual return = economic pension expense. However in CFAI, they have an example on page 107 in FRA book, this formula doesnt come close to working. Can anyone explain what I am missing? Should I throw the Schweser forumla out the window and re-learn?

#2

I found this too - the Schweser formula appears to be wrong. The easiest way I found to calculate economic pension expense is employers contribution minus change in funded status.

#3

Try using current service cost + interest + plan ammendmants - actual return on assets… that should work

#4

This is really confusing. Try solving question 33 on pg 134. Though the text gives a different formula for calculating eco. pension expense, you get the same answer using this Service cost + interest cost - actual return = economic pension expense. so which one is the correct method???

#5

I thought it was the change in components of PBO (excluding benefits paid) less actual return on assets

#6

economic pension expense = service cost + interest cost - plan ammendments - actual return economic pension expense = change in funded status - contributions Both are given by Schweser on the same page in the FSA reading.

#7

Have to agree, this is way to confusing in Schweser. I will have to reread it from CFAI. They use EPE = SC + IC - ARPA, which is outright wrong and was the last year’s formula (lol… yea formula’s do evolve)

#8

This is full proof. Change in PBO + Benefits Paid - (Change in Plan Assets + Benefits Paid - Employer Contributions)

#9

i do this: Change in PBO + Benefits Paid - Plan Contributions - Actual Return on Plan Assets

#10

I use this - it works, right? change in funded status - contributions

#11

or change in PBO + benefits paid - actual return on plan assets Remember that plan contributions is not included in economic pension expense if using the change in PBO method

#12

I would like to add to the mess to, here it is Economic Pension Expense = change in Funded Status - Firm Contribution