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Hi,
I have some questions about defined benefit calculations in the revision guide…
1. What are past service costs? is a curtailment a past service cost?
2. How is the interest on obligation and asset calculated in the net interest on net benefit asset/liability calculated?
In example 3, the guide says you have to add an increase in obligation to the opening balance of obligation but for example 4, the pension paid out is deducted from liability to calculate the interest on obligation (8% * 4300 – 300)
The pension paid out is also deducted in the interest on pension asset calculation but the contributions are added.. (8% * (3,600 + 550 – 330))..
I can’t grasp these concepts properly, please can you explain?
Also is there likely to be a full question on this topic in the exam?
Many thanks in advance!
In future, please use topic (not the question name) as the thread header.
Also – one question per post please.
Please read our course notes again and listen to the on-line lecture again.
If you can do Q3 in the BPP kit……………….that’s what matters.
General principle is that interest is on the OPENING pension liability / asset. There is sometimes a past service cost adjustment at the start of the year which may affect this.
ABOVE ALL – REMEMBER THIS IS AN EXAM WHERE YOU EXPLAIN THINGS – calculations get very few marks, and if you make a minor error, you probably won’t lose anything.
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