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CFA Level I · CFA Level I Exam · Topics in Long-Term Liabilities and Equity

Under IFRS, the actual return on plan assets exceeds the amount implied by the discount rate applied to plan assets. The excess is most likely recognized in:

The excess is most likely recognized in other comprehensive income as a remeasurement. Under IFRS, only the discount-rate-based interest on plan assets goes through profit or loss within net interest, while the difference between actual and that implied return is a remeasurement item that is not later reclassified.

  1. Aprofit or loss as a reduction of service cost
  2. Bother comprehensive income as a remeasurementCorrect
  3. Cprofit or loss as part of net interest expense

Explanation

Under IFRS, the difference between actual return on plan assets and the interest income computed using the discount rate is a remeasurement, recognized in other comprehensive income and not reclassified to profit or loss later. Only the discount-rate-based interest amount enters net interest in profit or loss.

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