Wiley has an annoying discrepancy when explaining how to calculate ending PBO. First it says to start with beginning PBO then add service cost and interest on PBO and deduct contributions. However a Simulation in the same book says to add Pension Cost to beginning PBO and then deduct contributions. Can anyone tell me which is the right method?
Joined: 15 Apr 2009 Location: United States
Online Status: Offline Posts: 151
Posted: 16 Apr 2009 at 01:43 | IP Logged
Can you post the question?
Change in PBO is calculated as:
Beginning balance + Service cost + Interest cost + Amortization of prior service cost + Amortization of unrecognized Loss + Amortization of existing net obligation = New PBO
Adding net periodic pension expense to PBO and then deducting contributions doesn't do anything unless you also deduct beginning plan assets. The net amount is presented on your BS as Pension Plan Asset or Pension Plan Liability.
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Topic: Ending PBO calculation issue.
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