Pensions+Class+2+completed

Pensions+Class+2+completed - PensionsandOtherEmployee...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Pensions and Other Employee  Pensions and Other Employee  Future Benefits Future Benefits Introduction Introduction and Benefit and Benefit Plan Basics Plan Basics •Introduction •Defined contribution plans •Defined benefit plans •Nature of pension plans Presentation, Presentation, Disclosure, and Disclosure, and Analysis Analysis •Presentation •Disclosures Illustration •Analysis Defined Benefit Defined Benefit Pension Plans Pension Plans The employer’s obligation •Plan assets •Funded status Benefit cost components •Immediate recognition approach •Deferral and amortization approach •Other considerations Comparison of results •Other defined benefit plans IFRS / Private IFRS / Private Enterprise Enterprise GAAP GAAP Comparison Comparison Comparison of IFRS and private enterprise GAAP •Looking ahead
Background image of page 1

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

View Full DocumentRight Arrow Icon
2 Funded Status Funded Status Accrued Benefit Obligation (ABO) - Fair Value of plan assets = Funded status ABO > Plan assets = underfunded = funded status liability ABO < Plan assets = overfunded = funded status asset
Background image of page 2
3 Components that change ABO and fund assets (therefore, funded status) include: 1. Current service cost 2. Interest cost 3. Past service cost 4. Return on plan assets 5. Actuarial gains and losses Components of Components of  Pension Benefit Cost  Pension Benefit Cost
Background image of page 3

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

View Full DocumentRight Arrow Icon
4 Pension cost should be accrued and recognized in accounting periods that benefit from employees’ service Two approaches to accounting for pension expense Immediate recognition approach Allowed under PE GAAP Deferral and amortization approach Required under IFRS Allowed under PE GAAP Accounting for Pensions Accounting for Pensions
Background image of page 4
5 Immediate Recognition Approach Immediate Recognition Approach Pension Expense Current service cost + Current interest cost + Actual return on Plan Assets - Past Service Costs recognized immediately Actuarial gains/losses recognized Immediately + or -   + or -  
Background image of page 5

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

View Full DocumentRight Arrow Icon
Immediate Recognition Approach Immediate Recognition Approach ABO and fund assets are not recognized as separate balance sheet accounts (they are off-balance sheet or memo accounts) Accrued pension asset/liability recorded on the balance sheet represents the net position or funded status ABO is based on valuation used for funding purposes , not based on projected benefits obligation Because all changes are recognized immediately (i.e. actuarial gains/losses and post service costs), pension expense is highly variable from year to year 6
Background image of page 6
7 Used to accumulate information needed for the formal journal entries and to keep track of the relevant pension plan items and components reported off-balance sheet The Pension Worksheet The Pension Worksheet
Background image of page 7

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

View Full DocumentRight Arrow Icon
8 Immediate Recognition - Example Immediate Recognition - Example General Journal Entries Memo Record Items Annual Pension Expense Cash Accrued Pension A/L Accrued Benefit Obligation Plan Assets Bal. Jan 1 2010
Background image of page 8
Image of page 9
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/16/2011 for the course ACTG 3P33 taught by Professor N-a during the Fall '08 term at Brock University, Canada.

Page1 / 39

Pensions+Class+2+completed - PensionsandOtherEmployee...

This preview shows document pages 1 - 9. Sign up to view the full document.

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