Total Periodic Pension Cost question

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gsauls4

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So this is the sample question I was given word for word…
The following is partial information related to the defined benefit pension plan of CompuTech Inc. ($000):
Defined benefit obligation, beginning of year $35,000
Defined benefit obligation, end of year $38,420
Beginning of year fair value of plan assets $41,000
Fair value of plan assets, end of year $45,330
Contributions $5,050
Benefits paid $4,000
Actuarial loss incurred in the current period $820
Past service cost from current period plan amendment $1,500
Current Service Cost $3,000
Interest Cost $2,100
Actual Return on Plan Assets $3,280
Amortization of past service cost/acturial losses $515
What is the current year total periodic pension cost?
The answer is $4,140,000 but I am not sure how to arrive at that. I get a pension expense of $2,335,000 based on current service cost + interest cost - actual returns + amortization, but I assume I am going wrong in the treatment of OCI from this point with regards to amortization, past service cost, and actuarial loss. Can someone please explain how to get the answer? Thanks.
 
Pension cost = contributions − Δfunded status
$5,050 − (($45,330 − $38,420) − ($41,000 − $35,000)) = $4,140
 
In addition to what S2000 mentioned:
Total periodic pension cost = current service costs + past service costs + interest expense +/- actuarial losses/gains due to changes in asssumptions - actual return on plan assets
3000 + 1500 + 2100 + 820 - 3280 = 4140
 
gsauls4 wrote:… I assume I am going wrong in the treatment of OCI from this point with regards to amortization, past service cost, and actuarial loss.
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It appears that you’re confusing pension cost with pension expense. The entire cost is pension cost, regardless of whether it’s presented on the income statement (pension expense) or in OCI.
 
S2000 - you’re right. If one were going to examine what goes into OCI from this question though, can you elaborate on that? Thanks.
 
gsauls4 wrote:S2000 - you’re right. If one were going to examine what goes into OCI from this question though, can you elaborate on that? Thanks.
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It depends on whether this company uses IFRS or US GAAP.
Under IFRS, pension expense (on the income statement) will comprise:
  • Current service cost
  • Past service cost
  • Net interest expense (= interest expense − (beginning plan assets × discount rate))
and OCI will include:
  • Actuarial gains/losses
  • Actual return − (beginning plan assets × discount rate)
Under US GAAP, pension expense will comprise:
  • Current service cost
  • Interest cost
  • Expected return on plan assets (reduces pension expense)
  • Amortization of previous past service costs
  • Amortization of previous actuarial gains/losses
and OCI will include:
  • Past service cost
  • Actuarial gains/losses
  • Actual return − expected return
 
Thanks for all the help, really appreciate it.
 
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