pension cost


can someone explain the question 23 from the morning mock exam pls?

Under US GAAP we have to calculate the amount of periodic pension cost reported in the P&L.

The answer is: Current service cost 1,151 + Interest cost on the obligation 5,441 - Expected return on plan assets 4,597 + Amortization of past service cost 272 = 2,267

But what about the Actuarial gains and losses including differences between the actual and expected returns on plan assets (page 80 form Kaplan) that is immediately recognized in the P&L or more commonly recognized in OCI and subsequently amortized to P&L using the corridor or faster recognition method?

Thank you so much

Actuarial gains and losses typically go to OCI under both US GAAP and IFRS. Under US GAAP they can go to Pension Expense on the income statement, but I’m quite sure that nobody ever does that.

Under US GAAP they’re amortized using the corridor method; under IFRS they’re not amortized.

Yes, I found it soon after I posted the question. The problem is that the corridor method is poorly explained in Kaplan books.

Thank you, sir!

My pleasure.

Hello again, Sir,

referring to 17 from the afternoon mock exam 2017: If Shah adopts the economic perspective (versus the traditional approach for determining CFO) as explained to Zhang for Pension plan A, the CFO will most likely be:


b.higher by $1,838

c.higher by $588

So, we know that when the employer`s contributions for the year are greater than the total periodic pension cost, the excess goes to CFF as it must be seen like a principal payment on our debt. Therefore, the CFO goes up due to lower amounts classified in operations.

The answer gives the following:

University contributions $3,150

Total pension expense $ 2,562

Excess payment over expense $588

What bothers me is the wording “Net retirement expense for the year” which is actually the Total periodic pension cost, but the way it is given is confusion because the “periodic pension cost” (expense) is that part of the “total periodic pension cost” that is reflected in the P&L.

On the other hand, if I try to calculate the Total periodic pension cost = change in funding status + contributions, I cannot get the same figures.

I don`t know if you have access to this question (probably yes), if not, will provide it to you.

Thank you in advance!