I suggest Bloodline recieves a thousand AF points because of this post!
One more question guys!
Under GAAP, do we amortize the hole bin ie. OCI (actuarial G/L, past servise cost and difference between expected and actual return) using corridor approach or only acturial G/L and the rest just stays in the bin?
Dude! This is superb!!
Thanks alot!!!
From what you wrote I guess we should amortize past servise cost over the life of employees and actuarial g/l using corridor approach. But do we amortize difference between actual and expected returt at all?
Great summary, great putting a little uplifting approach to a demoralizing subject!
My understanding of this is that under GAAP, past service cost is amortized into the income statement by dividing the amount of past service cost by the total number of employee years. So in each period for the income statement, you will have a portion of your income expense relating to amortized portion of past service cost.
The rest of the OCI (gains/losses, expect minus actual, remeasurements) get amortized based on the corridor approach.
So corridor approach apllies to actualrial losses and difference between expected and actual return?
It is not implicitly stated in CFAI text.
EDIT: ok
Appreciated a lot mate!
here’s what the book says
“thus, under U.S. GAAP, differences between the expected return and the actual return on plan assets represent another source of actuarial gains or losses. As noted, actuarial gains and losses can also result from changes in the actuarial assumptions used in determining the benefit obligation. Under U.S. GAAP, all actuarial gains and losses are included in the net pension liability or net pension asset and can be reported either in P&L or in OCI Typically, companies report actuarial gains and losses in OCI and recognise gains and losses in P&L only when certain conditions are met under a so-called corridor approach.” (Institute 178)
No worries buddy.
yea, that cleared a lot! i owe you a large beer 
btw sorry for a small offtopic, but what’s you strategy for the last week?
Just repeatedly doing fast revisions on Corporate Finance, Derivatives, and Fixed Income. I try to take note of points which appears that i have never seen before.
I spend 2 hours a day on Ethics
Dedicate the last two days to solving EOCs on Equity and FSA. --I think i have this two pretty much nailed down, but i need to commit them both to my memory before the exam.
My entire strategy is focussed on Corp, Derivatives, Fixed Income, Equity, FSA, Quants and Ethics.
I have a pretty solid understanding of Portfolio.
I haven’t studied Economics at all, and probably will not do so. I understand triangular arbitrage, and that it is.
Alternatives could go either way for me
I’ve done FSA EOCs 3 times over last 4 month, I doubt it would provide sth new to me next time. EOCs generally seem a bit to lengthy. Ratio of new knowledge to time is too small I guess. I rather focus on revieving mock exams and my own notes (200 pages) + 30 qbank ethics a day.
I have done them once, and i still consider them invaluable. In the end, the questions are going to come right out of the CFAI textbooks, so my approach has been - why focus elsewhere? I have studied entirely from the CFAI textbooks, and occasionally reverting to schweser.
I might be wrong, time will decide that. But i find that my understand tends to improve a lot this way. I have done some mocks, will do one or two more in this last week.
A mericans A mortize
CFAI EOCs are good, especially the vignette ones.
This is amazing - i’m putting you on the board of BlueStar Airlines!
Thank you op. This was an amazing and well timed summary of pensions for level ii.
I’m saving a copy of this to read on my tablet during the break (if pensions don’t get tested in AM)… I hear this site’s going down on exam day.