Expected return on plan assets has one role in the employer's benefit accounting. Expected return is the periodic-cost component derived from the supported long-term rate and applicable asset base. It reduces cost while actual return remains in the plan-asset rollforward.
Apply it
Expected return of $900,000 and actual return of $1.05 million create a $150,000 favorable asset difference. Periodic cost uses $900,000; the difference enters OCI and AOCI.
Common mistake
Do not assume that expected return changes the plan-asset rollforward. Actual return changes plan assets; expected return is a periodic-cost component used with the gain-or-loss bridge. That error would misstate both the asset rollforward and the current actuarial gain or loss.
Keep the boundary clear
Do not substitute market performance for the supported expected-return component. Keep the rate, base, policy, actual return, and gain-or-loss bridge visible.
Authority
Read ASC 715-30-35-23 for the distinction between expected and actual return.
Put the concept to work
Apply this concept
- Explain and apply expected return on plan assets within a reconciled employer benefit-plan workpaper using supplied authoritative and actuarial facts.
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Build on these ideas
- Expected long-term return rate — Apply
To apply this concept: Required. This prior schedule supplies a required amount or classification.
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Required level here: apply. Required. This prior schedule supplies a required amount or classification.