So economic pension expense : contributions - (change in funded status, where an increase is positive and a decrease is negative) that same for both IFRS and GAAP
Pension expense: Service cost + Interest Cost + Amortized Prior Service Cost + Amortized gains/ losses - expected ROA for GAAP.
Oh one last one funded status, Plan Assets - PBO reported as a liability for GAAP, but with IFRS for funded status you add back in prior service cost and actuarial losses?
MissCleo, reverse your first equation: Economic Pension Expense = Change in Funded Status - Contributions. Change in Funded Status = Ending PBO - Beginning PBO - Actual Return on Plan Assets.
It depends on what works for you, but just remember that Pension Expense is a cost.
If you say economic pension expense = contributions - change in funded status, it is not accurate. Why?
If pension expense =$1000, it means you deduct $1000 from your operating income. If you have paid $300 in contribution, that offsets your expense…but the way you did it, it increases your expense. If you know what you’re doing it’s ok, but you should be consistent.
Using the formula economic pension expense = contributions - change in funded status may be missleading. Just remember that:
Economic pension expense = Employer’s Contributions - decrease in the unfunded status.
When the status becomes “less unfunded” your expense decreases. The only real expense (economic expense) is the cash paid the company. The higher the decrease in your pension liability, the less cash you need to cover the liability, which in turns keeps more of it within the company.