What is a good reposonse to this discussion respone? To: Vickie Plato From: Danl
ID: 2400300 • Letter: W
Question
What is a good reposonse to this discussion respone?
To: Vickie Plato
From: Danlee Mata
Date: July 7th 2018
Subject: Amortization of Gains and Losses in Pension Expense
Pension expense is the amount that a business charges to expense in relation to its liabilities for pensions payable to employees. The amount of this expense varies, depending upon whether the underlying pension is a defined benefit plan or a defined contribution plan. Pension expense includes several components. Amortization of cumulative gains/losses. These gains/losses occur for two reasons. The plan assets may provide a return that is either greater or less than that was expected. Another reason is there are changed in actuarial assumptions that may create increases or decreases in pension liability. If any given year, the gains or losses become to great than at least a portion must be include in pension expense, not to understate or overstate the annual obligation. This is done through a process called amortization. To decide whether or not you should include gains/losses in annual pension expense, calculate 10 percent of either the PBO or the PA (whichever is greater) or a corridor. Amortize the amount of any gain or loss falling outside the corridor over the average remaining service life of the active employees. The gains/losses must exist at the beginning of the year for which amortization takes place.
Corridor and Minimum loss amortization
(280,000 – 250,000)/10 years = 3,000
(280,000 – 3,000)/85,000 = 362,000
(362,000 – 290,000)/12 = 6,000
(362,000 – 6,000)/12,000 = 368,000
Explanation / Answer
if you understood completely, you can finish the topics by saying thank you or you can ask further question about this, like ;
When an employer issues a plan amendment, it may contain increases in benefits that are based on services rendered by employees in prior periods. If so, then when cost of these additional benefits are amortized ?
possible reasons of that gain or loss ?
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