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OK, I’ve been tearing my hair out over this for two weeks. I can calculate everything, but I just don’t get how the entries work.
First off – is OCI a nominal or a real account? My thought was it was a nominal account that collected the transactions applicable to the current period (pensions being one of them) and then this was closed to ACOI.
So say you have a prior service costs for the period. You can’t debit the whole thing to OCI or do you? It would seem like that would be a disaster for Comprehensive Income.
Or is it like this:
Year 1: Prior Service Cost $100,000
Dr. ACOI $100,000
Cr. What – Pension Liability, but we don’t recognize the entire thing? Or is this some off -balance sheet account?
In other words, if the entire $100,000 is added to the PBO, but you haven’t funded it, why doesn’t it show up as a huge pension liability on the balance sheet. In other words when you do the year end calculation (PBO – Plan Assets) why doesn’t that result in a huge pension liability for anything that’s being amoritized. Or by the same token, whey aren’t company’s why aren’t these costs showing up as huge offsets to retained earnings in the SHE equity section of the balance sheet. Is a debit in ACOI really like a liability?
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