Pension accounting US GAAP

In the Kaplan schweser video on total pension cost calculations under US GAAP, there is a OCI calculation of $101.

Service cost $8000

Interest cost $13250 [$132500 Beg PBO X 10%]

Exp Return ($9576) [$79800 FV of planned asset X 12%]

Prior SC $100 [$2000/20 yrs = 100]

Acturial G/L $ 375 [$7500/20 yrs = 375]


Pension Exp $12,149

OCI $ 101


Tot Pen Cost $12,250


This has been arrived upon by the following method

OCI CALCULATIONS:-

Amortized loss (375) [7500 Amortized over 20 years being the 10% corridor difference between Begining Unamortized loss $20750 - $13250 (PBO* Discount rate)]

Unrecognized gain (1424) [$11000 actual return - $9576 expected return]

Unregonized loss 1900 [$2,000 prior service cost - $100 Amortized (taken to I/S)]


OCI Net change 101

What is confusing is that while doing OCI calculaitons the amortized acturial Loss of $375 is used to reduce OCI, while it is clearly taken into the income statement as an Amortized loss.

Could someone help me and save my Soul :slight_smile: !! Thanks a ton in advance !!

In terms of actuarial G/L, these are recognized in OCI for IFRS, and for US GAAP they are recognized in OCI unless they exceed the 10% corridor (10% of the greater of PBO or plan assets), then this is taken to the income statement (for GAAP only)

Get that completely. Under US GAAP, If the unamortized loss exceeds the 10% corridor of (PBO or Plan Assets, since it is a loss calculation we use PBO), we take that amount (Actuarial loss) to the I/S and amortize it over the service life of the employee in this case 20 years. Since in this case it exceeded 10%, the amortized loss hits the I/S. Now while calculating OCI, why is the amortized loss of $375 considered, since that amount has already gone through the I/S. Thanks for the reply!