Settlement Allowances on Retirement

Actuarial Gain or Loss

From one plan period to next, if the experience of the plan differs from that anticipated using the actuarial assumption, an actuarial gain or loss occurs. For example, an actuarial gain would occur if the plan asset earned 12% for the period while the assumed rate of return used in the valuation was 8.00%. Other causes of actuarial gain or losses would include changes in actuarial assumption and or demographic changes in the population profile.

Balance sheet Assets/(Liability)

The sponsor's balance sheet asset/(liability) entry, the net recognized amount, is the sum of the cumulative excess of contribution to the plan over net annual expense and other plan-related charges to income due either to business combination or accelerated recognition pursuant to AS-15(R). The difference between this account and the funded status is the unrecognized net loss/(gain) unvested prior service costs (and net transition obligation).

Funded status

This is the excess / (shortfall) of the fair value of plan assets over the plan liability.

Plan Liability

This quantity is the discounted present value of all benefits attributed by the plan's benefit formula to service rendered prior to the measurement date. It is measured using an assumption as to future pay levels.

Service cost

This is the discounted present value of benefits attributed by the plan benefit formula to service rendered by employees during the accounting period. It is measured using an assumption as to future pay levels.

Interest cost

This increase in the plan liability over the accounting period due to interest (the time value of money).

Expected return on asset

The expected return on assets over the accounting period, based on an assumed rate of return.

Net periodic benefit cost

This is the profit and loss charge for the accounting period, and comprises the sum of the service and interest cost less the expected return on asset, plus allowance for amortization of any net liabilities not recognized in the balance sheet.