In Its 2018 Annual Report to Shareholders, JDS Corporation Disclosed

question 172

Essay

In its 2018 annual report to shareholders, JDS Corporation disclosed the following information about its pension plan:
$$\begin{array} { | l | r | r | } \hline \text { (\$ in millions) } & \mathbf { 2 0 1 8 } & \mathbf { 2 0 1 7 } \\\hline \text { PROJECTED BENEFIT } & & \\\text { OBLIGATION } & & \\\hline \text { Beginning balance } & \$ 120.0 & \$ 102.2 \\\hline \text { Service cost } & 4.1 & 5.5 \\\hline \text { Interest cost } & 7.0 & 6.5 \\\hline \text { Benefits paid } & ( 2.6 ) & ( 4.4 ) \\\hline \text { Actuarial loss } & \underline { 6.6 } & \underline { 11.4 } \\\hline \text { Ending balance } & \$ 135.1 & \$ 121.2 \\\hline\end{array}$$
The increase in the underfunded projected benefit obligation was primarily attributable to a reduction in the assumed discount rate. This was combined with the effect of increases in benefits under the terms of the plan in excess of current inflation rates. The net result was reflected as a reduction in accumulated other comprehensive income.
-Why did the loss result in a reduction in accumulated other comprehensive income?

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Definitions:

Total Utility

The overall satisfaction or utility a consumer derives from consuming a certain quantity of goods or services.

Philosopher-Economist

An individual who contributes to the fields of philosophy and economics, often analyzing the ethical implications of economic theories or decisions.

Jeremy Bentham

A British philosopher, jurist, and social reformer in the 18th century, known as the founder of modern utilitarianism.

Marginal Utility

The further happiness or usefulness a person gets from consuming an additional unit of a product or service.