[Anonymous]

63 questions later I’m still confused. Wow I hate pensions about as much as I hate leases. Does anyone know if in calculating Pension Expense (same thing as Net Pension Expense right?) the expected or actual return on plan assets is subtracted. I’m using WTB and

On problem: PVD-0016 the text link notes “Although the actual return on plan assets is measured and disclosed as one of the components of net pension expense, net pension expense will include only an amount equal to the expected return on plan assets. ”

on Problem: PVD-0022 the are subtracting Actual Return on Plan Assets to get to pension expense

Service cost $165,000

Interest on P.B.O. 15,000

Actual return on plan assets (18,000)

Pension expense $162,000

What am I missing???

[mjp44]

Its been a little while since i took FAR but for pension expense calc, you add service + interest costs and subtract gain or add a loss. The gain /loss is the difference between your actual and expected return. So if your actual return> expected return that = a gain. Vice versa for losses

FAR- PASSED (11/13)
REG- PASSED (2/14)
BEC- PASSED (5/14)
AUD- PASSED (8/14)

If it's important to you, you will find a way. If it isn't, you will find an excuse.

[mjp44]

Its been a little while since i took FAR but for pension expense calc, you add service + interest costs and subtract gain or add a loss. The gain /loss is the difference between your actual and expected return. So if your actual return> expected return that = a gain. Vice versa for losses

FAR- PASSED (11/13)
REG- PASSED (2/14)
BEC- PASSED (5/14)
AUD- PASSED (8/14)

If it's important to you, you will find a way. If it isn't, you will find an excuse.

[Nuffsaid]

Actually, you always use the EXPECTED RETURN in calculating pension expense. ALWAYS.

This is how it works.

The actual return is a Credit (deduction from expense), and a debit to the Plan Asset.

The difference between the actual return and the expected return is credited(debited) to Pension expense and debited(credited) to Gain/Loss OCI account, which means that the actual return +/- difference = expected return will always be used to determine pension expense.

If you're just straight up calculating the Pension expense, then you can skip the middle step and use expected return on plan assets to calculate it, because this will always be the ultimate amount of expense.

[Nuffsaid]

Actually, you always use the EXPECTED RETURN in calculating pension expense. ALWAYS.

This is how it works.

The actual return is a Credit (deduction from expense), and a debit to the Plan Asset.

The difference between the actual return and the expected return is credited(debited) to Pension expense and debited(credited) to Gain/Loss OCI account, which means that the actual return +/- difference = expected return will always be used to determine pension expense.

If you're just straight up calculating the Pension expense, then you can skip the middle step and use expected return on plan assets to calculate it, because this will always be the ultimate amount of expense.

[Author]

Replies