[jonsw1ee]

Hey guys, studying for FAR and I’m getting really confused. Any help will be appreciated.

So in the case of prior service costs/pension losses:

A penion loss increases the PBO and results in a greater expense to the company.

DR: OCI

CR: Pension Benefit Liability

Why is this the case? I think I’m getting mixed up here with the properties of OCI. A debit adds to OCI account, but shouldn’t there technically be a decrease in the AOCI account because the company is incurring a greater expense? I’m not even sure if this question make sense anymore, but hopefully someone can help me out.

Thanks in advance!

[Anonymous]

OCI is just equity. Big, scary, strange equity, but equity nonetheless. Like revenues and expenses and gains and losses and every other normal equity account, OCI is increased by credits and decreased by debits.

[Anonymous]

jonsw1ee,

This is not an expense yet, you'll expense it when it's amortized.

Entry will be something like this, i think:

D Pension expense 100 (includes $5 of PBS amortization)

C OCI 5

C PBO 95

the whole PBS amount will be eventually reversed from OCI

[jonsw1ee]

Thanks for the reply guys. And yea, I understand that OCI is an equity account that will be soon be amortized into the IS.

I think my confusion comes from the Becker video lectures, where they will call a debit to OCI as “goes into AOCI” and a credit “out of AOCI”.

[jonsw1ee]

Thanks for the reply guys. And yea, I understand that OCI is an equity account that will be soon be amortized into the IS.

I think my confusion comes from the Becker video lectures, where they will call a debit to OCI as “goes into AOCI” and a credit “out of AOCI”.

[Anonymous]

When you debit OCI, equity is reduced, you book this amount for later, you can say it goes into AOCI, I guess. When PBS is amortized it goes out of OCI, as you credit it.

[jonsw1ee]

OK, I think I MIGHT understand now. The terms “into/out of AOCI” don't really refer to a gain/reduction of OCI but rather the act of amortizing into the IS is “out of OCI”, which in the case of a pension loss is a credit.

[jonsw1ee]

OK, I think I MIGHT understand now. The terms “into/out of AOCI” don't really refer to a gain/reduction of OCI but rather the act of amortizing into the IS is “out of OCI”, which in the case of a pension loss is a credit.

[TiffaNiffaNi]

I found the whole OCI thing confusing in Becker as well. I wanted to see the t-accounts for what was really going on. Youtube Allen Mursau Pension Accounting. The guy is terribly boring but he shows you the flow of entries via worksheet format. I also referred to him for some governmental accounting stuff that I was having trouble “visualizing”.

FAR: 7/17/14- 79
AUD: 8/20/14- 91
REG: 10/1/14- 88
BEC: 11/10/14- 85

Becker Self-Study

[jonsw1ee]

^thanks, I'll def look into that.

[Jeff_A]

A credit will increase oci. It's going in as a debit…..against oci. A decrease in oci that will expense over time. At least this is my thought as I went through that chapter.

FAR- 83
BEC- 85
REG- 79
AUD- 91

[Author]

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