I uploaded the question and answer from the example I came across in a textbook.
Can someone help me understand the following please?
Pension cost in P&L (U.S. GAAP)
When subtracting the value of 1699, why do we only subtract the expected return, instead of subtracting the difference between the expected and actual return?
Pension cost in P&L (IFRS)
Why don’t we need to include actuarial gains and losses? Because all are reported under OCI?
When subtracting the value of 1699, why do we only subtract the expected return, instead of subtracting the difference between the expected and actual return?
The P&L assumes an expected return on assets
The OCI will then have the difference between expected and actual return
Think P&L is smotthed assuming, for example mix of assets will have a return of 6% ov time, but in some years it could be +20% and others -6%. It is OCI that is “taking the volaitility”
Pension cost in P&L (IFRS)
Why don’t we need to include actuarial gains and losses? Because all are reported under OCI?
