Question

In: Accounting

List the components of pension expense.

List the components of pension expense.

Solutions

Expert Solution

There are five components of pension expense. They are as follows :

A. Service cost component: The actuarial present value of benefits that is attributed by the formula of pension benefit to employee service during the period.

B. Interest cost component: The increase in the projected benefit obligation due to the passage of time.

C. Actual return on plan assets component: Actual return on plant assets component is the reduction in pension cost for actual investment income from plan assets and the change in the market value of plan assets.

D. Amortization of prior service cost: Amortization of prior service cost is the cost of retroactive benefits granted in a plan amendment.

E. Gains and losses: Gains and losses are change in the value of either the projected benefit obligation or the plan assets resulting from experience different from that assumed or expected or from achange in an actuarial assumption.


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