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Hi everyone, I have been searching all of the day regarding to the actuarial gains & losses, however, I still haven’t found the answer, can any one here help me on this? Thank you very much
The question is: If the actuarial gains occurred, does it mean the actuary under estimate the return on investment, therefore decrease the plan obligation, and actuarial loss means the actuary over estimate the return, then increase the plan obligation or vice versa?
Please please, anyone help me, this question bothered me horribly in my revision of defined benefit scheme for employee.
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Acturial gain means that the plan obligation should be decreased, but if there is an actuarial loss and you have to decrease the plan assets and vice versa.
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The plan investments and the plan obligation are determined by different factors so that they are separate issues. An actuarial over- or under-estimate of the return of the plan investments should not affect the plan obligation. What will affect is the defined benefit liability, which is the difference between the plan obligation and plan investment after various adjustments.
The Macaljoy case at Dec 2007 has summarised and illustrated quite comprehensively the accounting treatments of the post employment benefits.
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