2011 Financial 6 Text Update - This first page gives a...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
This first page gives a listing of the corrected lecture text pages that follow. Print these corrected pages and insert in the lecture text. FINANCIAL Date Added Lecture Page Number Description 03/17/2011 F-6 12 Text change 03/17/2011 F-6 16 Text change 03/17/2011 F-6 41 Add text 03/24/2011 F-6 16 Change text in graphic 04/11/2011 F-6 39 Add text to table 04/18/2011 F-6 34 Change text
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Financial 6 Becker Professional Education | CPA Exam Review F6- 12 © 2010 DeVry/Becker Educational Development Corp. All rights reserved. B. Funded Status Under U.S GAAP, companies must report the funded status of their pension plan(s) on the balance sheet as an asset or a liability (or both). The funded status of a pension plan is calculated using the following formula: FORMULA: Fair value of plan assets < PBO > Funded status If a company has multiple defined benefit pension plans, the funded status of each plan is calculated separately. Note that the fair value of plan assets and PBO must be disclosed separately in the pension footnote disclosures. 1. Pension Plan Asset (noncurrent) A positive funded status (fair value of plan assets > PBO) indicates that the pension is overfunded. For balance sheet reporting purposes, all overfunded pension plans are aggregated and reported in total as a noncurrent asset. 2. Pension Plan Liability (current, noncurrent or both) A negative funded status (fair value of plan assets < PBO) indicates that the pension is underfunded. All underfunded pension plans are aggregated and reported as a current liability, a noncurrent liability, or both. Underfunded pension plans are reported as a current liability to the extent that the benefit obligation payable within the next 12 months exceeds the fair value of the plans' assets. EXAMPLE ABC Company has three defined benefit pension plans. The company's actuary has provided the company with the following information as of December 31, Year 1. Plan A Plan B Plan C Expected benefit payments – Year 2 $5,000,000 $5,000,000 $5,000,000 Fair value of plan assets $7,000,000 $5,500,000 $4,500,000 Projected benefit obligation $6,000,000 $6,000,000 $6,000,000 What is the over (under) funded status of each pension plan and what amounts should be reported as noncurrent asset, current liability, and noncurrent liability on ABC's December 31, Year 1 balance sheet? Calculation: Plan A Plan B Plan C Total Fair value of plan assets $7,000,000 $5,500,000 $ 4,500,000 Less: PBO (6,000,000 ) (6,000,000 ) (6,000,000 ) Over(under)funded status $1,000,000 $ (500,000 ) $(1,500,000 ) $(1,000,000 ) Noncurrent asset $1,000,000 -0- -0- $ 1,000,000 Current liability -0- -0- $ 500,000 $ ( 500,000) Noncurrent liability -0- $ 500,000 $1,000,000 $(1,500,000) A current liability will be recorded for Plan C because the expected benefits payable in the next 12 months exceed the fair value of the plan assets by $500,000.
Background image of page 2
Financial 6 Becker Professional Education | CPA Exam Review F6- 16 © 2010 DeVry/Becker Educational Development Corp. All rights reserved.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/25/2011 for the course ACCOUNTING AC591 taught by Professor W during the Spring '11 term at Keller Graduate School of Management.

Page1 / 7

2011 Financial 6 Text Update - This first page gives a...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online