GAAP vs. IFRS PERIODIC PENSION COST

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brklyn

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I keep coming across contradicting formulas… can someone please break it down for me. thanks!
 
Let me link to use this from Bloodline with one disclosure:
http://www.analystforum.com/forums/cfa-forums/cfa-level-ii-forum/91321052
I’m still trying to figure this out and would appreciate some insight, but I do NOT think TPPC and PPC are the same. It says that in the article, and I’ve seen some of Wiley and Schweser’s notes that seem to use the term interchangebly. The reason I think they are different is that I’ve seen some of CFAI’s material in their books that explicity shows different answers when asking for PPC and then TPPC separately.
But that article is a great place to start. If someone wants to correct me on the above paragraph I’d even appreciate some insight…
 
TPPC refers to the total amount of pension cost. Which is made up of (1) PPC reported in P&L and (2) PPC reported in OCI
The main TPPC formula is just: TPPC = ending funded status - contribution - beginning funded status
The other TPPC formula that breaks it down to current service cost, past….. that will differ depending on if you are referring to GAAP or IFRS.
Your confusion with the formula’s probably comes from (1) calculations for PPC for P/L is different than PPC for OCI because they represent different components of TPPC and (2) IFRS and GAAP will also have different ways of calculating PPC for P/L and PPC for OCI
It’s really just memorizing…. it can be annoying
 
TPPC= contribution -(ending funded status- begining funded status)
IFRS periodic Current service cost + past services cost + net interest expense (PBO-Planned asset differential times discount rate)
US GAAP current service cost + real interest cost (real cost) - expected return (expected return rate) + amortization of (Past serivce cost and acturial gain and loss)
 
Agreed with what h21 saids. These are the correct formulas
The GAAP periodic pension cost is sometimes amended to economic pension cost and replaces expected return with actual return. Can someone please shed some light on this iteration of the formula?
Also while we are on topic Q22 of the pm CFA mock the least appropriate answer to the effect of a higher discount rate on the pension cost components A) current service cost would increas (but decrease right answer) agree with this but option B) interest cost may decrease or increase- how can the interest cost decrease with a higher discount rate since interest expense (beg. oblig x discount rate)?
 
Spacecowboy1 wrote:
Agreed with what h21 saids. These are the correct formulas
The GAAP periodic pension cost is sometimes amended to economic pension cost and replaces expected return with actual return. Can someone please shed some light on this iteration of the formula?
Also while we are on topic Q22 of the pm CFA mock the least appropriate answer to the effect of a higher discount rate on the pension cost components A) current service cost would increas (but decrease right answer) agree with this but option B) interest cost may decrease or increase- how can the interest cost decrease with a higher discount rate since interest expense (beg. oblig x discount rate)?
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It can for a mature plan.
 
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