Chapter 17, Problem 6CPA

To determine

Treatment of recognizing gains and losses related to plan assets: The difference between actual return and expected return on plan assets is represented as gains and losses related to plan assets. If the actual return is higher than expected return, it indicates a gain, and if actual return is lower than expected return, it indicates a loss. These gains or losses are recognized on statement of comprehensive income as ‘Other comprehensive income’ (OCI), and on balance sheet as ‘Accumulated other comprehensive income’ (AOCI).

Treatment of recognizing gains and losses related to pension obligation: The decrease or increase in pension obligation due to changes in existing and revised projected benefit obligation (PBO) is represented as gains and losses related to pension obligation. If the PBO with revised estimate is higher than PBO without revised estimate, it indicates a loss. If the PBO with revised estimate is lower than PBO without revised estimate, it indicates a gain. These gains or losses are recognized on statement of comprehensive income as ‘Other comprehensive income’ (OCI), and on balance sheet as ‘Accumulated other comprehensive income’ (AOCI).

To identify: The correct option related to reporting of actuarial gains and losses as OCI.