## Plan Assets – Expected Return & Actual Return
### Plan Assets
Investments specifically set aside to fund the DBO. Always measured at fair value (not cost).
Contribution to Plan Assets:
```
Dr Plan Assets ×××
Cr Bank ×××
```
Benefits paid from Plan Assets:
```
Dr DBO ××× (obligation extinguished)
Cr Plan Assets ××× (fund pays)
```
### Expected Return on Plan Assets
Use the same discount rate as that applied to the DBO.
There are two accepted computation methods:
#### ICAI Method (Half-yearly compounding for net contributions)
```
Step 1: Half-year rate = √(1 + Annual rate) − 1
Step 2: Expected Return = (Opening PA × Annual rate) + (Net contribution × Half-year rate)
where Net contribution = Contributions received − Benefits paid
```
#### Simplified Method (6-month mid-year assumption)
```
Expected Return = (Opening PA × Annual rate) + (Net contribution × Annual rate × 6/12)
```
### Actual Return & Reconciliation
```
Actual Return = Expected Return + Actuarial Gain on PA
(or) Expected Return − Actuarial Loss on PA
FV of PA (closing) = Opening PA + Expected Return + Contributions − Benefits Paid + Actuarial G/L
```
### P&L Recognition
```
Dr Plan Assets (Expected Return) ×××
Cr P&L – Income from Plan Assets ×××
Dr Plan Assets (Actuarial Gain, if any) ×××
Cr P&L – Actuarial Gain on PA ×××
```