Pension data for Sterling Properties include the following: ($ in thousands) Service cost, 2021$112 Projected benefit obligation, January 1, 2021 850 Plan assets (fair value), January 1, 2021 900 Prior service cost—AOCI (2021 amortization, $8) 80 Net loss—AOCI (2021 amortization, $1) 101 Interest rate, 6% Expected return on plan assets, 10% Actual return on plan assets, 11% Required: Assume Sterling Properties prepares its financial statements according to International Financial Reporting Standards (IFRS). The interest rate on high-grade corporate bonds is 6%. Determine the net pension cost.

Net pension cost is $82,000.

Explanation:

The net pension cost can be determined as follows:

Details                                                 ($ in thousands)

Service cost, 2021                                         112

Interest cost (w.1)                                            51

Expected return on plan assets (w.3)          (90)

Amortization of prior service cost                  8

Amortization of net loss                                   1      

Net pension cost                                           82    

Workings ($ in thousands):

w.1: Interest cost = Projected benefit obligation, January 1, 2021 * Interest rate = $850 * 6% = $51

w.2: Gain from expected return on the plan assets = (Plan assets (fair value), January 1, 2021 * Actual return rate on plan assets) - (Plan assets (fair value), January 1, 2021 * Expected return rate on plan assets) = ($900 * 11%) - ($900 * 10%) = $9

w.3: Expected return on plan assets = (Plan assets (fair value), January 1, 2021 * Actual return rate on plan assets) - Gain from expected return on the plan assets = ($900 * 11%) - $9 = $99 - $9 = $90

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