Core Building Blocks of a DB Plan

Question 1

PBO / PVDBO

Answer 1

Present Value of Defined Benefit Obligation: The present value of future retirement benefits (liability).

Question 2

Plan Assets

Answer 2

Investments set aside to meet future pension obligations.

Question 3

Funded Status

Answer 3

Plan Assets − PBO: If negative → Net pension liability.

Question 4

Service Cost

Answer 4

Present value of pension benefits earned by employees this year.

Goes to Operating Expense under IFRS

Question 5

Net Interest Expense

Answer 5

Discount Rate × Opening Net Pension Liability. Financing expense.

Question 6

Remeasurements

Answer 6

Includes actuarial gains/losses and difference between actual & expected return. Flows through OCI.

Question 7

Service Cost

Answer 7

Income Statement: Operating Expense

Question 8

Net Interest

Answer 8

Income Statement

Financing Expense (NOT operating)

Question 9

Remeasurements

Answer 9

Other Comprehensive Income (OCI)

Never recycled to P&L

Question 10

Employer Contributions

Answer 10

Cash Flow Statement

Operating Activities

Question 11

EndingPlanAssets =

Answer 11

BeginningPlanAssest x (1+Actual Return) + EmployerContributions−BenefitsPaid