Questions belongs Pension Accounting

Hey guys, i found this question at Schweser.

  1. The funded status of plan assets is 85mn underfunded. Unrecognized gains total 12mn and unrecognized PSC is 27mn. What is the IFRS net pension liability.




My answer=C -85+12-27

But it wrong it’s a.

Can anyone explain this? -85-12+27

Why they substract 12 and add 27?

Thank you for all your comments

page 123 in schweser

I hope you understand why 85mn is in minus. It’s because the fund is underfunded. Unrealized gain is already accounted in funded status so you have to sustract it, not add it. Had it been liability, you would have added it. Same goes for unrecognized PSC.

To remember this, it follows exact same pattern as cash flow. When current assets increase, they are considered as use of cash flow and when liabilities increase, they are considered source of cash flows.

Perfect explanation. Thank you.

It is so clear.

But if it’s GAAP underfunded is 85mm correct sgupta?

yes that’s true. GAAP does reflect the actual status without smoothing.