Formula for Pens exp and PBO

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a7m002

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What is the formula for Pension exp and PBO? Im trying to do a problem here at work and dont have formulas with me.
 
pension expense = service cost + interest cost - ERPA (expected return on plan assets)
economic pension expense:
method 1: End PBO - Begin PBO + Benefits Paid - ARPA (Actual Return on plan assets)
Method 2: End Funded Status - Begin Funded Status - Employer Contributions
PBO:
End PBO=Begin PBO+Service Cost + Interest Cost - Benefits Paid + Prior Period Amortization charges (Due to service cost assumption changes as well as other amortization stuff)
 
cpk,
doesn’t regular pension expense also have effects of past service cost and deferred gain / loss amortization? i think you may have missed those two in the formula.
 
you are right niraj.
missed the amortization of prior service cost and deferred gain/loss amortization.
Usually those are not provided in many problems that I have seen. These three above are the more general components. These amortization costs are more exceptions to the rule.
thanks for bringing that up.
 
Wait a second I thought the economic pension expense formula was
Service Cost+Interest Cost+Plan Amendments-Actual Return on Plan Assets.
Should I also memorize End PBO - Begin PBO + Benefits Paid - Actual Return on Assets?
 
that is the 2nd way of calculating it. should be the same.
 
niraj_a Wrote:
——————————————————-
> cpk,
>
> doesn’t regular pension expense also have effects
> of past service cost and deferred gain / loss
> amortization? i think you may have missed those
> two in the formula.
Actually couldnt this be a question? The old standards included the amortized losses and what not, CPK i believe is referring to the newer standards where they are not included.
Isnt it possible for them to ask what the expense was in 2003 versus 2009 and the analyst must know which formula to use? or am i thinking of something else here.
 
SkipE99 Wrote:
——————————————————-
> niraj_a Wrote:
> ————————————————–
> —–
> > cpk,
> >
> > doesn’t regular pension expense also have
> effects
> > of past service cost and deferred gain / loss
> > amortization? i think you may have missed those
> > two in the formula.
>
>
> Actually couldnt this be a question? The old
> standards included the amortized losses and what
> not, CPK i believe is referring to the newer
> standards where they are not included.
>
> Isnt it possible for them to ask what the expense
> was in 2003 versus 2009 and the analyst must know
> which formula to use? or am i thinking of
> something else here.
you are thinking of how the funded status is reported on the B/S….and you are correct to say that they could ask that as a question between 03 & 09.
What CPK is talking about above is the calculation of the PBO, which has not changed between 03 & 09.
 
What is the difference between pension expense between 2003 and 2009?
 
Pension Expense uses the expected return on plan assets. Economic pension expense uses the actual return on plan assets.
 
rellison Wrote:
——————————————————-
> What is the difference between pension expense
> between 2003 and 2009?
not expense, but reporting the funded status to the B/S. the difference is the “smoothed” items (amortized loss/gain etc..)
if they ask it for before 2006(NOT SURE ON THE DATE) you include the smoothed items. if it is more recent, you simply report the funded status. been a while since i reviewed this so if someone who is more familiar can add on, they would likely be able to help you more
 
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