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Chapter 20: Question 7BE (page 1162)

Shin Corporation had a projected benefit obligation of \(3,100,000 and plan assets of \)3,300,000 at January 1, 2017. Shin also had a net actuarial loss of $465,000 in accumulated OCI at January 1, 2017. The average remaining service period of Shin’s employees is 7.5 years. Compute Shin’s minimum amortization of the actuarial loss.

Short Answer

Expert verified

Actuarial loss is a term used when an organization bears a specific decrease in projected benefit obligation. It is highly influenced and affected by the discount percentage used in ascertaining the plan’s future worth.

Step by step solution

01

Given the amounts:

Particulars

Amount

Projected benefit obligation

$3,100,000

Plan assets as on Jan 1, 2017

$3,300,000

Actuarial loss

$465,000

Average remaining service period

7.5 years

02

Computation of Shin’s minimum amortization of actuarial loss.

Particulars

Amount

Net loss in accumulated OCI

$465,000

Less: Corridor ($3,300,000×10100)

$330,000

Excess

$135,000

Divide: Average remaining service life

7.5 years

Minimum amortization of the actuarial loss

$18,000

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