Hi,
I don’t get the exact differences between pension cost and pension expense. Formulas seems different but it is more about the fundamentals that I bug.
Does someone has a trick about this ?
Thanks,
M
P&L: Pension expense
P&L + OCI: Pension cost
Seems a very good explanation as total change will be flowing through the IS and OCI.
Pension expense: Service cost + Interest Cost + Amortized Prior Service Cost + Amortized gains/ losses - expected ROA for GAAP.
Service cost + interest cost - expected returns ± Amortization of Actuarial losses/gains + Amortization of past service costs (Under GAAP)
Service cost + interest cost - expected return (assumed to be same as discount rate used: a yield on a high quality corporate bond) + Past service cost
The main idea is that all loss due to market or service unexpected is taken slowly. hence the idea still remains that service cost + int - returns
If you have invested good amount then your return will offset interest cost and service cost.