[Verse 1] When companies promise pensions to their staff There's more than meets the eye in the math Five components make up the expense each year Let me break them down so it's crystal clear Service cost is what employees earn today Interest cost makes obligations grow each day Expected return reduces what we see Amortization smooths what used to be [Chorus] S-I-E-A-A, pension parts in display Service, Interest, Expected return away Amortization twice to make it right Prior service cost and gains overnight Income statement shows the total sum Balance sheet reveals what's yet to come [Verse 2] Service cost is compensation for work done Added to projected benefit when year is done Interest cost grows the obligation size Like compound interest that multiplies Expected return on assets brings relief Reduces pension expense, provides belief But actual returns can differ from the plan Creating gains and losses, understand [Chorus] S-I-E-A-A, pension parts in display Service, Interest, Expected return away Amortization twice to make it right Prior service cost and gains overnight Income statement shows the total sum Balance sheet reveals what's yet to come [Bridge] Prior service cost from benefit changes past Amortized slowly, makes the impact last Actuarial gains and losses too Smoothed over time in what they do Funded status tells the balance sheet story Assets minus obligations, full glory If underfunded, liability appears If overfunded, asset perseveres [Verse 3] Analysis requires a deeper look inside Don't just trust the smooth expense as guide Check the footnotes for the real detail Actual returns and assumptions tell the tale Cash contributions differ from expense Funding requirements make the difference dense Watch for changes in the discount rate They can make obligations fluctuate [Chorus] S-I-E-A-A, pension parts in display Service, Interest, Expected return away Amortization twice to make it right Prior service cost and gains overnight Income statement shows the total sum Balance sheet reveals what's yet to come [Outro] Five components tell the pension story From service cost to actuarial glory Income statement and balance sheet combined Give analysts the complete state of mind
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