Question
In: Accounting
PBO estimate declined by 40 million Expected return on plan assets = 50 million Actual return...
PBO estimate declined by 40 million
Expected return on plan assets = 50 million
Actual return on plan assets = 20 million
What is the net increase in AOCI? (A net loss was reported AOCI in the previous year's balance sheet)
Solutions
Expert Solution
Pension gains and losses (either from changing assumptions regarding the PBO or the return on assets being higher or lower than expected) are deferred and not immediately included in pension expense and net income. They are, however, reported as other comprehensive income in the period they occur.
1. PBO estimate declined by 40 million- The 40 million is considered a gain and is reported in the statement of comprehensive income rather than being reported in P/L.It then becomes part of accumulated other comprehensive income in the balance sheet a part of net gain–AOCI.
2.(loss from actual return falling short of expected) i.e. 30million as a gain in AOCI.
The Net loss—AOCI in the balance sheet increases by the current 30 million Loss—OCI and decreases by the current 40 million Gain—OCI, a net reduction of 10 million.
($ in millions)
Plus: Loss—OCI 30
Less: Gain—OCI (40)
Decrease in Net loss—AOCI (10)
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Actuary's discount rate
3
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($ in millions)
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Assets
Beginning of 2018...
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