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Director decide to form a pension benifit scheme on 1 dec 2001 .the following details relate to 31 nov 2002.
PV OF OBLIGATION 121
FV Of PLAN ASSET 116
CURRENT SERVICE COST 10
past service cost 110
DISCOUNT 10%
CONTRIBUTION 100.
In such case when the begining FV of plan asset and PV of obligation is zero .The xpected return of plan asset and the interst cost for benifit obligation would be charged on which figures?There is now NO SUCH THING AS EXPECTED RETURN ON PLAN ASSETS!!!
If there had been, and there isn’t, the expected return (which no longer exists as a matter to be considered) would be calculated on a pro-rata basis on the value of the plan assets through the year. In your hypothetical example, if expected return on plan assets still existed, it would have been calculated on the 100 invested on 1 January.
There would be no interest cost because the current service cost would only have been recognized with effect from the end of the first year
Ok?
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