An FRA question is driving me nuts. This is based on IFRS.
If TPPC - Periodic Pension Cost in P&L = PPC in OCI
And I’m asked to solve for P&L in OCI using the data below,
I could either solve for P&L in OCI by calculating it directly, or calculate PPC in P&L and subtract it from TPPC.
The solution is calculating P&L in OCI directly, which I couldn’t remember, but figured I could solve using my method.
But, I’m not coming up with the correct solution. Can someone help show me how my logic of solving via TPPC minus Pension Cost in P&L is flawed? Or how I calculate Pension Cost in P&L correctly, as I am missing something here… Thank you.
DATA:
TPPC = $585.8 million
Employer Contributions = 75.5
Current Service Cost = 57.4
Plan Amendments = (189)
Actuarial Gain = 274.7
Plan Assets @ Start of Year = 4,038
Plan Assets @ End of Year = 3,307.50
PBO @ Start of Year = $3,651.9
PBO @ End of Year = $3,431.70
Actual Return on Plan Assets = -18.6%
Discount Rate = 6.6%
PPC in the P&L would be:
Current Service Cost
(+) Past Service Cost
(+) Net Interest Cost
= Pension Expense Reported in P&L
SOLUTION: The answer to the above problem is a loss of $742.9 reported in the OCI.
This is equal to the Actuarial Gain of $274.7 less Net Return on Plan Assets: Actual Return less Expected Return x Plan Assets @ Beginning of Year = -18.6% minus 6.6% = -25.2% x $4,038 = -1,017.6.
$274.7 - $1,017.6 = $742.9 total OCI Loss.
Thank you.
