# Pensions Are Easy - 2010

I have completely updated my document on pension accounting (there are a number of changes between the 2009 and 2010 curriculum). I am posting the new version below. I recommend the pdf version I created. It is much easier to read as I have highlighted and underlined many important components. I have posted the pdf version on my linkedin profile. Feel free to add me and then download it directly. My name is Jean-Francois Saine, I don’t share my name with any other Linked In member.

Thanks for updating this, really appreciate it. Contributions like yours are what makes AF such a great resource. I have had your original post on pensions bookmarked for several months, and will now replace it with this new version.

Thanks for the info.

Bump - To give a chance for everyone to see this updated version.

Very nice- I’ve suspected that pensions aren’t that difficult, you just need them to be laid out in a logical manner. This is great for getting the basics. Thanks!

Johnny, EE pension expense is “Contributions - Change Funded Status”, not the other way around.

davidyoung@sitkapacific.com Wrote: ------------------------------------------------------- > Johnny, > > EE pension expense is “Contributions - Change > Funded Status”, not the other way around. My formula is for Economic Position. Your formula is for Economic Expense. I know that CFAI has an example where they use you’re order of things, but it is very misleading. Like I’ve said: “Shunned from our industry.” Both formulas will yield the same answer if the overall FS increases. But only mine will yield the right answer if overall FS decreases. Now, I haven’t seen a questionwhere it decreases, but it is clearly a possibility. My formula will derive the economic position whatever the case. Example 1: Contributions are 8 and FS goes from 15 to 20. Your formula: 8-20-15=3 My formula : 20-15-8=-3 So, same anwer, you’re expense is 3, my economic position is -3. Example 2: Contributions are 8 but FS goes from 20 to 15. Your forumla: 8-15-20=-27 My forumla : 15-20-8=-13 The economic expense is 13, not 27 here. You’re formula makes this error. In any case, think about it, if your FS decreases by 5, that is an expense, if you take into account that it would have decreased by 8 more had you not contributed, that is an expense. Total is 13. Cheers, JFS

Super.

If anyone has questions on the way the information is presented, please contact me. Sometimes things that sound clear to one person aren’t to everyone, so I would be happy to discuss any parts of this document.

bump

hey i dont understand… u say there is significant amnt of changes in pension from 2009 to 2010… i dont see ne… can u pls highlight few???

Great notes. Thanks. Is Interest cost — the increase in the PBO due to the passage of time?

Bump!

So just to make it concrete, the econ pension expense is what the net pension liability would have increased by (or what the net pension asset would have fallen by) if the firm had made zero contribution to the pension fund… does that sound right?

sorry… its the funded status that we’re interested in not the net asset / liability… how about, the econ pension expense is the amount that the funded status would have declined by (smaller positive number or larger negative number) if the firm made no contributions to the pension fund…

Pensions are GRRRRREEEEEEEAAAAAAT!!!

whats a pension? like a pen mansion or something why would anyone care about that