WHy do I have 3 different formulas of TPPC based on solutions to questions.
TPPC = change in net pension liability + employer contribution = [(End Benefit obligation - End plan assets) - (Beginning Benefits obligation - Beginning Plan Assets)] + employer contribution
TPPC = change in funded status - employer contribution = {(Plan asset at end of year - B.O at end of yr) - (Beginning Plan asset - Beginning B.O.)} - employer contribution
TPPC = contribution - change in funded status
Why do I see so many different formulas and they are all different. Which one is right?
Let’s call the three versions of the formula you fund as TPPC1, TPPC2,TPPC3.
As you can see, TPPC2 = - TPPC3. Here just take it as TPPC3 should give you the positive figure, while TPPC2 will give you the negative number, stressing the fact that TPPC is a cost, hence we need to pay for it.
If funded status is positive, then it’s a pension asset, otherwise it’s a pension liability. Hence:
change in net pension liability (in TPPC1) = - change in funded status (in TPPC3). Again TPPC 1 and TPPC3 are essentially the same formula.
I believe the other TPPC formula you probably should remember is:
TPPC = Current Service Cost + Interest Cost - Actual Return on Planned Assets +/- Acturial Loss / Gains + Prior Service Cost
this derives from the 3 forumula you’ve stated above. So don’t panic, they’re all talking about the same thing!
Hope this clarifies.