How would you go about calculating the periodic pension cost and the change in OCI for the below? THe mock solution doesn’t really make sense to me.
Beg benefit obligation 635
Plans assets beg. 592
Contributions 84
Payments to retirees. 38
Past service costs 0
Current service costs 94
Actuarial gain due to change in assumptions 51
Actual return on plan assets 57
Discount rate. 8%
Expected Return on assets 10%
Periodic Pension Cost = Current Service Cost + Interest Cost + Past Service Costs
− Actuarial Gains + Actuarial Losses − Actual Return on Plan Assets
= 94 + (635 × 8%) + 0 − 51 + 0 − 57 = 36.8
Pension Expense (IFRS) = Current Service Cost + Past Service Costs + Net Interest Expense
= 94 + 0 + (635 − 592) × 8% = 97.44
ΔOCI = Actuarial Gains − Actuarial Losses + Actual Return less “Expected” Return
= 51 − 0 + 57 − (592 × 8%) = 60.64 = 97.44 − 36.8
The company is using GAAP. The solution has it as total pension expense=csc+amortization of past service costs+IE-expected return-component of gains including difference between actual and expected return shown on income statement-amortization of gain including difference between actual and expected return from OCI. Answer is 85,600.
For OCI it has negative past service + amortization of past service costs+component of actuarial gain from OCI- amortization of actuarial gain. Answer is 49,800.
I am lost with these solutions.
Can anyone assist me here? Thanks!
Periodic Pension Cost = Current Service Cost + Interest Cost + Past Service Costs
− Actuarial Gains + Actuarial Losses − Actual Return on Plan Assets
= 94 + (635 × 8%) + 0 − 51 + 0 − 57 = 36.8
Pension Expense (USGAAP) = Current S10ervice Cost + Interest - Expected Return
= 94 + (635 x 8%) - (592 x 10%) = 85.6
ΔOCI (USGAAP) = Period Pension Cost - Pension Expense
= 36.8 - 85.6 = -48.8
ΔOCI (USGAAP) = Past Service Cost + Actuarial Gains − Actuarial Losses + Actual Return less “Expected” Return
= 0 + 51 − 0 + 57 − (592 × 8%) = - 48.8