Potash Corporation of Saskatchewan, the world's largest potash producer, is a Canadian corporation based in Saskatoon, Saskatchewan. The company produces nitrogen and phosphate used to produce fertilizer. At the end of 2011 , the company controlled \(20 \%\) of the world's potash production capacity, \(2 \%\) of nitrogen production capacity and \(5 \%\) of phosphate supply.

Required

a. How much pension expense does Potash Corporation report in its 2012 income statement?

b. The company reports a \(\$ 57\) million expected return on pension plan assets as an offset to 2012 pension expense. In general terms, how is this amount computed? What is the purpose of using this expected return instead of the actual gain or loss?

c. What factors affected the company's pension liability during 2012? What factors affected the pension plan assets during 2012?

d. What does the term funded status mean? What is the funded status of the 2012 pension plans and postretirement benefit plans?

e. The company decreased its discount rate on the pension obligation from \(4.60 \%\) to \(3.85 \%\) in 2012. What effect(s) does this decrease have on the company's balance sheet and income statement?

f. How did Potash Corporation's pension plan affect the company's cash flow in 2012?

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Defined Benefit Plans The components of total expense recognized in the consolidated statements of income for the company's defined benefit pension and other post-retirement benefit plans, computed actuarially, were as follows: Current service cost for benefits earned during the year...... Interest cost on benefit obligations .... Expected return on plan assets.. ..... Prior service costs Plan settlements... Pension Other Total 2012 2011 2010 2012 2011 2010 2012 2011 2010 $30 $24 $20 $11 $8 $7 $41 $32 $27 17 16 49 49 47 (57) (53) (47) 4 - (1) 1 16 T (53) (2) (1) (1) (2) 3 66 Total expense recognized $22 $24 $19 $26 $23 $22 in net income 65 $48 $47 63 (47) (1) (1) $41 Of the total expense recognized in net income, $38 (2011-$38, 2010-$33) was included in cost of goods sold and $10 (2011-$9, 2010-$8) in selling and administrative expenses. The change in benefit obligations and the change in plan assets for the above defined benefit pension and other post-retirement benefit plans were as follows at December 31: