Can someone explain how these two flow through the income statement? and if there is a difference between US GAAP and IFRS?
Thank you in advance.
Under either system (US GAAP or IFRS), you are allowed to use the actual return on plan assets as a reduction to the annual pension expense. Nobody ever does this (because it’s too volatile); everyone uses the expected return on plan assets as a reduction to the annual pension expense.
The difference between the expected return and the actual return is included in OCI as part of the actuarial gains and losses. Under IFRS, it remains in OCI. Under US GAAP, if it exceeds a threshold (the corridor approach), then it is amortized (with the amortization going through the income statement as part of the pension expense).
Note that while under US GAAP the company can choose the expected return on plan assets as it sees fit, under IFRS the expected return on plan assets is the same as the discount rate for the pension obligation.
Can you give an example?
Also is formula correct?
Total periodic interest cost (income statement) =
-
Service cost
-
interest cost
-
amortization of past service cost (GAAP)
- Expected return on plan assets
= Total periodic pension cost, which is the same things are economic pension cost? How is this the same thing as
Contributions - (ending funded status - beg funded status)?
on the balance sheet:
Beg PBO
-
service cost
-
interest cost
- actual returns on plan assets
- / - actuarial losses / gains
= End PBO?