DSquaredSlim

Leave aside the formula for a while now. Here is how my thinking goes:

The smoothening effect allows the

A. Past service cost,
B. Deferred gain / loss = (Expected - actual return),
C. Transition liability / asset

to be taken to the OCI & lets you amortize the things each year.

So your liability includes

1. Original liability +
2. Unamortized past service cost +
3. Unamortized deferred losses (gains) +
4. Unamortized transition liability (asset)

Now, if you really want to be fair to your users, IFRS would say to the makers of financial statement: "Boss, you've a helluva lot of liabilities. Take all of them and subtract it with your fair value of assets"

Instead, what IFRS telling is: "Total liability - (point 2+3+4 above) - fair value of asset".

This stuff is blowing my mind. Can anybody please explain it with the logic?