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here i have a question like this
the actuarial value of T pension plan showed a surplus at 1 dec 2010 of $72m,representing by the fair value of the assets of $250m, the present value of the defined benefit obligation of $200m and net unrecognised actuarial losses of $22m.The corrider approach is used by the co.
the answer of this question is:
PV of obligation at 1 dec 2010 200
FV of assets at 1 dec 2010 (250)
Actuarial losses (22)the resulting answer is (72)
my real answer is why unrecognised loss of $22m is added in fv of assets or less from pv of obligations…..???
Because it’s a debit balance!
Why (in F3!) is a debit entry either recording an item of expense (bad news) or recording the acquisition of an asset (good news)?
All assets get converted into expenses over the period of their lifetimes
Now, in case you didn’t know (and I’m sure that you did!) the corridor approach is no longer allowed and the account “net unrecognised gains / losses account” is no longer in existence. Whichever question you are looking at, the answer should have been re-written
Mike i need some more detail
actuarial loss arise when there is actual obligation is more than expected.so if the resulting difference is, say $22m.why we did not add in opening obligation of $200m rather than add in fv of asset $250m.An actuarial loss (or gain) can arise as follows:
where the actuary measures the present value of the obligation at an amount greater than the carrying value (or an amount less than the carrying value)
where the actuary measures the value of the plan assets at an amount less than carrying value ( or an amount greater than carrying value)
in summary, the actuary can tell us that the value of the obligation or the value of the assets is greater or less than the carrying value
In your post, the $22m actuarial loss will be added to the account “Present Value of Future Obligation” and charged (debited) to the profit or loss account
Is that ok?
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