Present Value of Projected Benefit Present Value of Projected

Obligation (PBO) - establishment Benefit Obligation (PBO) –

of defined benefit plan subsequent years
Benefit after n service years xxx PBO, start of the year xxx
PVIFA (Discount %, xxx Service cost this year xxx
retirement span) Interest cost this year xxx
PV, end of final service year xxx Benefits paid (xxx)
PV of 1 factor (Discount %, xxx PBO, end of the year xxx
# of years till retirement)
PV of PBO xxx
PROFIT & LOSS
Components of defined benefit cost or
employee benefit expense
 Current Service Cost
Annual benefit xxx Interest Cost
PVIFA (Discount %, xxx
retirement span) PBO last year xxx
PV, end of final service year xxx Multiply: Discount rate xxx
PV of 1 factor (Discount %, xxx Interest cost this year xxx
# of years till retirement)
Service cost, Year 20XX xxx Interest Income

Fair value of plan asset xxx

Past Service Cost Multiply: Discount rate xxx
Amended PBO xxx Interest cost this year xxx
Unadjusted PBO (xxx)
Past service cost xxx
 Settlement of plan • Component of service cost

• Routine settlement is not a settlement

PV of DFO settled xxx but an actuarial assumption that should
Settlement price (xxx) be included in the measurement of DFO
• It is a lump sum payment to plan
Settlement gain (loss) xxx
participants made under the terms of the
existing defined plan
• PV of DFO settled > settlement price =
settlement gain
• PV of DFO settled < settlement price =
settlement loss

• Settlement-transaction that eliminates all

further legal or constructive obligations
for part or all of the benefits provided
under a defined benefit plan
Summary
Current service cost xxx
Past service cost xxx
Interest expense on PBO xxx
Interest expense on effect of xxx
asset ceiling
Interest income on plan assets (xxx)
Settlement loss (gain) (xxx)
Employee benefit expense xxx
OTHER COMP. INCOME
Components of defined benefit cost or
employee benefit expense
 Effect of Asset Ceiling
Prepaid benefit cost (surplus) xxx
Asset ceiling (xxx)
• Asset ceiling is the present value of
Effect of asset ceiling xxx
any economic benefits available in
Remeasurement Loss (Gain) on the form of refunds from the plan or
Asset Ceiling reductions in future contributions to
the plan
Effect of asset ceiling, end xxx
Effect of asset ceiling, beg (xxx) • Any change in the effect of the asset
ceiling, excluding interest on the
Change in the effect of asset xxx
ceiling effect of the asset ceiling, is a
remeasurement to be recognized
Interest exp on the ‘effect of (xxx)
through OCI.
asset ceiling, beg’
Remeasurement loss (gain) on xxx
asset ceiling

• If change in the effect of asset

• Increased: remeasurement loss
• Decreased: remeasurement gain
 REMEASUREMENTS
Actuarial Gains ( Losses)
Remeasurement Gain (Loss) on
PBO - actual xxx
Plan Assets
PBO - estimated (xxx)
Actuarial gains (losses) xxx Fair value of plan assets xxx
Multiply: Actual rate of return xxx
• Actual PBO > Estimated PBO = actuarial loss
• Meaning: PBO increased Actual return on plan asset xxx
• Actual PBO < Estimated PBO = actuarial gain
Interest income on plan asset (xxx)
• Meaning: PBO decreased
Remeasurement gain (loss) on xxx
• Due to changes in the present value of the
plan assets
defined benefit obligation but not because of
the introduction, amendment, curtailment, or • Actual return > Interest income =
settlement of the benefit plan remeasurement gain
• Actual return < Interest income =
• Must be unbiased and mutually compatible remeasurement loss
• Assumptions must comprise of demographic
assumptions and financial assumptions
Summary
Current service cost xxx Employee benefit expense xxx
Past service cost xxx Net remeasurement - OCI xxx
Interest expense xxx Total defined benefit cost xxx
Interest income (xxx)
Settlement loss (gain) (xxx)
Employee benefit expense xxx

Actuarial gain (loss) xxx

Remeasurement gain (loss) xxx
on plan assets
Remeasurement gain (loss) xxx
on asset ceiling
Net remeasurement - OCI xxx
INFORMATION CONTAINED
IN THE MEMORANDUM RECORDS OF THE
SUBENTITY
• Fair value of plan assets (FVPA) is Fair value of plan asset xxx
the source of fund set aside in PBO (xxx)
meeting future benefit payments
Prepaid/accrued benefit cost xxx

• Projected benefit obligation (PBO)

or the defined benefit obligation is
the present value of future payments
required to settle the obligation in
the current and prior periods

• FVPA > PBO = overfunding

• Noncurrent asset

• FVPA < PBO = underfunding

• Noncurrent liability
 FV OF PLAN ASSETS PROJECTED BENEFIT OBL.

FVPA, beg xxx PBO, beg xxx

Contribution to the plan xxx Current service cost xxx
Interest income on FVPA xxx Interest expense on PBO xxx
Remeasurement gain (loss) xxx Past service cost xxx
on plan asset
Actuarial loss (gain) xxx
Benefits paid (xxx)
PV of DFO settled (xxx)
Settlement price of defined (xxx)
benefit obligation Benefits paid (xxx)

FVPA, end xxx Employee benefit expense xxx

• Actual return = interest income +

remeasurement gain (loss)