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Does expected return on plan assets affect the total periodic pension cost?

SbSSbS L2 candidatePosts: 11 Associate

If it affects then please explain how?

Best Answer

  • rahul12rahul12 Posts: 54 Sr Associate
    Accepted Answer

    No.

    TOTAL Periodic Pension Cost = Contributions - Change in Funded Status = service cost + interest cost - actual return on plan assets +/- actual g/l on change in PBO assumptions + prior service cost

    my understanding is that expected return on plan assets is only relevant for US GAAP. it is used in the calculation of net interest cost under US GAAP.

    changes in the expected return has no impact on plan assets, PBO, or periodic pension cost (PPC). It does, however, have an effect on how much of PPC goes to the income statement and what goes to OCI. 

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