Been trying to figure this out recently but couldnt. Could someone explain a couple of questions below:
Why “increase expected rate of return has no effect on Total Periodic pension cost”? based on the formula: Total Periodic Pension Cost= periodic pension cost in P&L + periodic pension cost in OCI. When we increase the expected rate of return, the periodic pension cost in P&L will be decreased. So, I assume the Periodic Pension Cost is also decreased as well, right? Am i missing something here?
When we “increase the discount rate”, the book mentions that the “service cost” and " interest cost" decrease. I am wondering what the impact will have for the “expcted rate of return”?
Thanks a lot for all your help!! Sorry to keep bothering you! But Iust want to have a good understanding on everything I see in the accounting section before I move on to the next part.
for the first question. I am just wondering why the change in the pension cost in OCI will offset the pension cost in P&L? Does it mean when we change someting affecting the “pension cost in P&L” will also change the “pension cost in OCI” with the same amount?
It was a typo. I meant “discount rate”. When we “increase the discount rate”, the “service cost” and “interest cost” decrease. what the impact will have from the “increase in discount rate” on the “expcted rate of return”? The reason why I ask is because how do we know for sure the “Periodic pension cost in P&L” decrease when “the discount rate increase” while the “expected rate of return” is also a factor?