Question

Table: Selected information of Ouyang Inc.

Financial Information	2013	2012
Net income	19,282	17,263
Net periodic benefit cost	920	728
Pension information
Benefit obligation
Service cost	495	382
Ending balance	7,918	6,771
Plan assets
Company contribution	293	277
Expected return on plan assets	2,738	2,482
Actuarial gain	182	273
Ending balance	8,231	7,827
Funded status	313	1,056
Unrecognized past service cost	109	89
Unrecognized actuarial loss (gain)	382	311
Net asset (liability) in the balance sheet	804	1,456

The estimated increase in the pension obligation due to benefits earned by current employees of Ouyang Inc. in 2013 is:

a)	920 million

b)	293 million

c)	627 million

d)	804 million

e)	495 million

Answer 1

Option A is not correct as 920 is the final increase in liability, considering increase in benefits earned, actuarial gains/losses, finance cost etc

OPtion B is not correct as 293 mn is the contribution to plan asset and therefore, is not related to benefit costs

Option C is not correct

Option D is the net final liability and therefore, is not cost

Option E, ie. 495 mn is correct.Benefits earned by current employees is reflected in the current service cost. Current service cost mentioned for 2013 is 495 mn. Therefore, USD 495 mn is the right answer