Why use expected rate of return in pension calculation?

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  • June 21, 2015 at 5:10 pm #194952
    Mikep057812
    Member

    Hi guys, been using the forum and some ninja tools for a month now, but first time posting.

    I was wondering if someone can shed some light on a small detail that just keeps bothering me.

    Why do we use expected rate of return of plan asset when the calculation for pension expense is done end of year and we know the actual return of plan asset. Is there a logical explanation to that, am i missing something, or is it just one of those it is how it is things.

    Thanks for help in advance.

    FAR - 87 - 08/2015
    AUD - 11/2015
    REG - 05/2016
    BEC - 08/2016

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  • June 21, 2015 at 5:32 pm #674780
    mw798
    Member

    Because GAAP is based on accrual accounting and you are accruing pension expense throughout the year.

    June 22, 2015 at 5:18 am #674781
    Anonymous
    Inactive

    Because that's what the review book says.

    June 22, 2015 at 11:05 am #674782
    Monkey Wrench
    Member

    because thats what the working papers said last year.

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