What is Expected return on plan assets?
In short
The expected return on plan assets reduces net periodic pension cost. It is the expected long-term rate of return multiplied by the market-related value of plan assets.
Key takeaways
- The difference between the actual and expected return is an asset gain or loss.
- That gain or loss goes to other comprehensive income and is amortized only if it exceeds the corridor.
- This smooths the effect of market swings on pension cost.
Where it's tested
BAR: Employee Benefit Plan Accounting — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A defined benefit plan has plan assets with a fair value of $8,000,000 and a projected benefit obligation of $9,500,000. How is this reported on the balance sheet?