Quick Economic Pension Expense Question benefits, economic, included

Gypsy

When calculating economic pension expense, if we are given the components of PBO, should we include amortization g/l…I know one version of the formula is (change in PBO except benefits paid) - actual return on assets…which would indicate to me that amortization g/l should be included, but I think I’ve seen the amortization g/l handled both ways
Can anyone help?

canadiananalyst

Economic Pension expense recognizes all expenses recognized during the current year, not just the amortized expense. It does not allow for smoothing of amortizable expenses.
So, it should include not just the amount amortized this year, but all the expenses recognized this year.
For example: If during the current year, Actuarial losses of 100 million were recognized due to change in some actuarial assumption. But, this 100 million will be amortized in the Income statement over the next 10 years at $10 million a year.
Our economic expense calculation (which stands for the true expense) should include all of the 100 million, not just the 10 million recognized this year in the Income Statement.
Regards
Paddy

mar350

Economic Pension Expense = Service Cost + Interest Cost - Actual Return on Plan Assets

DSquaredSlim

ssr123456 Wrote:
——————————————————-
Economic Pension Expense = Service Cost + Interest
Cost - Actual Return on Plan Assets
so are you saying not to include other/amortization expense that is in the PBO?

Windjammer

The most general formula does do not include amortization amounts. From what I read in the books, economic pension expense is calculated in order to eliminate the smoothing effect type things that get baked into regular pension expense

mp3bu

EPE = Change in PBO - Increase in Plan Assets + Contribution in Period

MiniMe7

Pretty sure that’s incorrect…

skycfa

Pretty sure its right

ninja1024

My fault, you’re right

WarrenB1

economic pension expense is:
change in funded status (if it gets more under funded it’s a negative amount)
- firm contributions