Define the following important terms: 1. Pension expense (reported on financial statements) 2. Economic pension expense (what pension expense actually is) 3. Actual return on plan assets (if not given)
- Smoothed expense figure that is basically meaningless. Used only as a smoothing mechanism to stabalize earnings PV PBO + actuarial gains - past service costs - FV Pension assets 2. Actual pension expenses for period. (PBO1 - PBO0) - Empl. conribs - (PBA1 - PBA0) or empl. contrib - incr. in net funded status 3. unrealized gains + divs + realized gains + int. income
Pension Expense = Current Service Cost + Interest Cost - Expected Return on Assets +/- Amortization of (gain) or losses + Amortization of past service costs Economic Pension Expense = Change in Funded status - Employer contributions OR Change in PBO (exluding Benefits Paid) - Actual Return on Plan Assets Actual Return on Plan Assets? Is a formula given? Wouldn’t this just be what is earned by the investments? Or you could you the reconciliation of plan assets to extrapolate this number if given the right info.
Sorry for the typo…the last question/statement s/b Or you could use…
Whoops my first formula is wrong. that net funded status under IFRS it should be increase in PBO - pension asset earnings
kris10 - correct 3. Actual return on plan assets (if not given) = Change in plan assets less: contributions plus: benefits paid
- Pension Expense = Service Cost + Interest Cost + Amortization of Actuarial Gains/Losses - Expected Return on Plan Assets (I know I’m leaving out another amortization but I can think of it right now) 2. Economic Pension Expense = End Funded Status - Beg. Funded Status - Employer Contributions 3. I’m not sure exactly what I’m suppose to calculate but I’ll take a stab: Actual Return = End Plan Assets - Beg. Plan Assets + Benefits Paid - Employer Contributions
- Add amortization of past service cost?
+Amortization of Losses -Amortization of gains… (just to be clear).