I was reviewing secret sauce, came across needing to make changes to pension assets/liabilities before calculating RI, anyone aware of changes to be made?
This has got to do with the basis of RI model which is based on clearn surplus relationship where ending BV = beginning BV + NI - dividends.
If there are instances whereby changes are made directly to equity, such changes will not be captured under the RI model’s income but will be captured under it’s equity. Thus adjustments must be made to include these changes in income statements to properly reflect the “income” from directly changes to equity.
This applies for foreign currency gain/losses (think CTA for current method), gain/losses in other comprehensive income for held for sales securitieis and also pension liabilities where gain/losses are kept under comprehensive income.