Pension expense reported on IS = interest cost + service cost – expected ROA + prior service cost + actuarial loss + transition liabilities. Question: there’s no difference between the new and the old standard in calculating pension expense, correct? Beginning PBO + service cost + interest cost + actuarial loss* + prior service cost from plan amendment – benefits paid = Ending PBO. Questions: 1) this applies to both the new and the old standards, correct? 2) is actuarial loss = actuarial loss in the previous pension expense formula? Under the new standard: Funded status is reported as net pension asset or net pension liabilities on the BS. Under the old standard: Funded status + unrecognized actuarial loss + unrecognized prior service cost + unrecognized prior transition liabilities. Question: is the unrecognized items = to the respective items in the previous formulas? E.g., unrecognized actuarial loss = actuarial loss in the PBO formula? Thanks.
sleepybird Wrote: ------------------------------------------------------- > Pension expense reported on IS = interest cost + > service cost – expected ROA + prior service cost + > actuarial loss + transition liabilities. > Question: there’s no difference between the new > and the old standard in calculating pension > expense, correct? Correct. > > Beginning PBO + service cost + interest cost + > actuarial loss* + prior service cost from plan > amendment – benefits paid = Ending PBO. > Questions: 1) this applies to both the new and the > old standards, correct? 2) is actuarial loss = > actuarial loss in the previous pension expense > formula? I am not sure on these- 1. That holds for the standard as all the prior service costs and actuarial loss/gains will be recognized into the PBO immediately. Under the old standard they will be slowly recognized over time 2. Kind of. The actuarial loss in the formula directly above is the full amount. The one on the IS is only part of it because it is slowly be recognized (amortized in) on the IS. For example, if an actuarial change increases your PBO by 100 it will be reflected on the balance sheet immediately (as a charge to other comprehensive income, but this is beyond the scope of the material) but the 100 will slowly run through the IS based on the expected service life of the employees (as it runs through the IS it will hit the BS and the amounts booked to other comprehesive income will be recycled out). This will serve to smooth pension expense and consequently keep operating income smoother too. > > Under the new standard: Funded status is reported > as net pension asset or net pension liabilities on > the BS. > Under the old standard: Funded status + > unrecognized actuarial loss + unrecognized prior > service cost + unrecognized prior transition > liabilities. > Question: is the unrecognized items = to the > respective items in the previous formulas? E.g., > unrecognized actuarial loss = actuarial loss in > the PBO formula? Yes. > > Thanks.
mwvt9 1. That holds for the standard as all the prior service costs and actuarial loss/gains will be recognized into the PBO immediately. Under the old standard they will be slowly recognized over time Sorry, so are you saying that the formula is the same for both the new and old standards? But the actuarial G/L and the prior service costs amounts will be different? The new standard recognizes the entire unamortized amount while the old standard recognizes the amortized amount?
sleepybird: 1. all gains/losses and prior service costs are already recognized in the PBO (the plan’s liability). The difference is on the company BS liability, they used to be deferred and are now immediately recognized. BS treatment does not affect the PBO. 2. The PSC and GL amounts also will not be different, hence the amortization of the amounts into pension expense will not be different. Again, it only impacts how the company reflects on BS Does that help?