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How an Actuary calculates Expense for Pension Fund

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Let’s see some Actuarial Terminologies from Accounting Valuations point of view under US GAAP/IAS 19R: 1.Accumulated Benefit Obligations (ABO): ABO is an approximate amount of a company's pension plan liability at a single point in time. ABO is estimated based on the assumption that the pension plan is to be terminated immediately; it does not consider any future salary increases. Changes in annual ABO are mainly determined by changes in service costs, interest costs, contributions by plan participants. 2.Projected Benefit Obligation (PBO): A pension's projected benefit obligation (PBO) is an actuarial liability equal to the present value of liabilities earned and the present value of liability from future compensation increases.  Note: ABO differs from PBO as ABO does not includes any assumption about future compensation levels. For plans with flat benefit or non-pay related pension benefit formulas, the ABO and PBO will be same.

Today we will see Accounting Valuation through US …

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