Chapter 17 Homework K Question 2 (of 7) 2. 1000 points value Pension data for St

Question

Chapter 17 Homework K Question 2 (of 7) 2. 1000 points value Pension data for Sterling Properties include the following: (S in 000s) $135 550 600 96 Service cost, 2016 Projected benefit obligation, January 1, 2016 Plan assets (fair value), January 1, 2016 Prior service cost-AOCI (2016 amortization, $8) Net loss-AOCI (2016 amortization, $1) Interest rate, 8% Expected return on plan assets, 12% Actual return on plan assets, 13% Required: Assume Sterling Properties prepares its financial statements according to International Financial Reporting Standards. 8% is the interest rate on high grade corporate bonds. Determine the net pension cost thousand et pension cost

Explanation / Answer

Under IFRS the various components of pension expense are not reported
as a single net amount. Instead, Sterling Properties would separately
report service cost (including past service cost), net interest cost/income,
and remeasurement gains and losses:

* Because plan assets exceed the DBO, we have net interest income rather than net interest cost
** This solution assumes that the 6% interest rate is also the interest rate for high-quality
corporate bonds, which is the rate prescribed for determining the net interest cost/income.
Note: Using IFRS, there would be no prior service cost in AOCI and no amortization of the net
loss.

Service cost—2016 135 Past service cost Service cost 96 Service cost (reported in income statement) 231 Net interest income* (8%** x [$600-550]) 4 Statement of comprehensive income Remeasurement gain– OCI ([13% – 8%] x $600]) -30 Net pension cost 205

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.