Here’s something eve more fun: Elan’s 11th hour guide states Periodic Cost as : Ending Funded Status - Beginning Funded Status + Contributions. … which is totally wrong!
God I miss the secret sauce. This review book is a joke.
What’s wrong with you? There is nothing wrong with this equation either.
Fair value of planned assets= 1000 PBO- 980 A analyst wants to adjust Debt/assets ratio and will add pension assets and obligations to calculate adjusted Debt/assets ratio. Amount added to assets will be a) 1000 b) 980 c) 20
Vicky, Answer’s 980? 20 has already been recognized as an asset, so you recognize 980 more.
Yeah i have a doubt on this. Should ans be 980 or 1000?
Smagacian sir ?
I just explained it to you
Thanks cinderella howz ur cfa mocks going
Answer c when a company has a surplus in defined benefit plan the amount of asset that can be reported is lower of surplus or any ceiling mentioned. So here ceiling isn’t mentioned and surplus is 1000- 980=20
How? The cost is the differece between Contributions and change in funded status. Either Contributions - ΔChange or ΔChange - Contributions. Not ΔChange + Contributions…
@Panos: Please read page 177 of the curriculum. Periodic pensions cost is change in funded status plus employer contributions.
Periodic pension cost = Change in funded status plus employer contributions.
Where did you study this material from? Schweser/Elan/CFAI? Notes/videos?
Where do you see the “plus”. The word I see is “adjusted”. If you go to EOC 9 you’ll see that the correct way to solve this is : Contribution - ΔChange in funded status
or equivalently
Contribution - (ΔΑ - ΔL).
…which, now that I think of it, makes me right about Bloodline’s Equation.
Change in Liability - [Change in Assets + Employers contribution] is wrong for the same reason I outlined before.
Try to solve Q9 with this and you will see why
EOC 9.
Net pension liability or funded status increased by $20 from 3000 to 3020
Employer contributions 1,000
20 + 1000 = 1020
I think you’re looking at FS as A - L, whereas I look at FS as L - A.
Elan looks at it as L - A, and that’s how they explain everything.
You can arrive at the same result if you assume that funded status is L - A but does this make economic sense?
Overfunded for example means that Assets are more than the liabilities so naturally A - L is positive.
The way you see it, the plan is overfunded when the liabilities are greater than assets.
Ans c is correct?? Pls confirm vicky/cindrella
Yes it makes sense. If you have a net pension liability the plan is underfunded. Two ways of looking at the same thing.
Overfunded for example means that Assets are more than the liabilities so naturally A - L is positive and L - A is negative.
So we are really saying the same thing. Elan made it very clear that it looks at the funded status as L - A, so it all makes sense.
khan read the question again. The analyst is making adjustments here.
As per this question this formula would be (beg benefit-beg plan asset)-(end benefit-end plan asset) + employee contribution
As per this question this formula would be (beg benefit-beg plan asset)-(end benefit-end plan asset) + employee contribution
It makes algebraic sense, it doesn’t make economic sense. Look at the wording you used for the EOC.
“Net pension liability or funded status increased by $20 from 3000 to 3020”
It just doesn’t seem natural to say the funded status increased because the net pension liability increased. That’s just me I guess.