Pension query -- actual return on plan assets

[Kiakaha]

CFA EOC question 11 (chapter 23) says the actual return on plan assets is the expected return on plan assets plus actuarial gains. Why? I don’t get this….spent ages trying to answer the question by deriving economic pension expense then solving (which didn’t work) – any advice guys?
Thanks!!

 

[Thecodont]

i have not read the question but actual returns are just what they say…actual. Pension expense deducts expected gains. I this case i suspect that expected returns were less than actual. So your actuarial assumptions (expected returns would = x) were lower than the return the assets saw in reality. You would record this differnce as an actuarial gain. So all else equal the actuarial gain + expected return = actual return.
note that other items can produce actuarial gains or losses since they arrise from any of the many assumptions used (life expectancy, final sallary, years service bla bla)

 

[laksh]

Refer to pages 203 and 221.
Actuarial gains and losses = Expected returns - actual returns on plan assets, and changes in actuarial assumptions.

 

[Kiakaha]

Thanks guys!

 

[sgupta0827]

I hated some of the questions too, especially those with CF and NI adjustment. I didn’t understand them completely but have left them as grey areas and will take these questions again during questions session.
As far as I understood about this question, expected returns covers everything based on assumptions and known data at the time of estimating these returns, the only thing changes if there is a gain/loss due to misestimation so actuarial gain/loss must be the difference between expected return and actual return.