PBO calculation doubt


I have a doubt regarding the PBO calculation. Would be great if anyone could explain it!

The calculation of the end PBO requires:

Beg PBO + current service + int exp + past service +/- actuarial loss/gain - benefit paid

My question is whether this actuarial loss/gain is solely on account of the change in actuarial assumptions or does it also include the difference between the actual and exp return on plan asset.

Does the difference between the actual and exp ret on pla asset got anything to do with the PBO calculation in the first place and be included as an actuarial gain/loss if stated separately in a question???

Confusion is due to in the calculation of the total periodic pension cost the difference of actual and exp ret is taken as an actuarial gain /loss and transerferred to the OCI.


Changes in actuarial gain/loss is on account of changes in actuarial assumptions, there are 2 types of assumptions:

1 Economic :- interest rate used to discount future cash outflows, expected rate of return on plan assets and expected salary increases.

2 demographic:- life expectancy, anticipated service periods and expected retirement ages.

Changes in any of the assumptions increase or decrease PBO, Under US GAAP these changes are recorded through OCI to Shareholders Equity and are amortized to Income statement.

Under IFRS these changes are recorded through OCI to Shareholders Equity, but are not amortized to Income statement.

For Expected return , Under US GAAP it is required to define the expected return , under IFRS it is the discount rate which is taken into consideration as expected return.

So, Under US GAAP expected return is also one of the key actuarial assumption and any gain/loss is recorded in OCI .