Expected long term growth rate on assets 2008 2006 6.06% 6.79% Qn: Compared to the 2008 reported financials statements, if company x had used the same expected long term rate of return on plan assets assumptions in 2008 as it used in 2006, its year end 2008 pension obligation would most likely have been’ a) lower b)higher c)the same
expected long term growth rate on assets has NO impact on Pension obligation. So it will remain the SAME.
I think PBO is not affected by growth in plan assets, so C?
That was quick and correct too!! what I am failing to comprehend here is if it is used to calculate pension expense for the year why wouldnt it affect year end balance
pension expense is on the i/s. pbo is on balance sheet.
Growth rate does not affect PBO Obligation. Adjusting the discount rate however…
You got confused betweeen Pension Expense and Pension Obligation. PE has ERPA PBO has Benefits Paid and stuff. Just refer to the formula