04-18-12 Class26 Ch 20 Pensions

Accounting for pensions accounting for pensions

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Unformatted text preview: s 4. Amortization of Prior Service Costs 5. Gain or Loss Chapter 18-37 Effect on Expense + + ++ +- LO 4 List the components of pension expense. Accounting for Pensions Accounting for Pensions Components of Pension Expense 1. Service Costs Effect on Expense + Actuarial present value of benefits attributed by the pension benefit formula to employee service during the period. Present value of the new benefits earned by employees during the year Chapter 18-38 LO 4 List the components of pension expense. Accounting for Pensions Accounting for Pensions Components of Pension Expense 2. Effect on Expense Interest on the Liability + Interest for the period on the projected benefit obligation outstanding during the period. The interest rate (settlement rate) should reflect the rate at which companies can effectively settle pension benefits. Actuary work to identify the time value of money factor, assumed appreciation, interest, as liabilities are recorded on a discounted basis. Chapter 18-39 LO 4 List the components of pension expense. Accounting for Pensions Accounting for Pensions Components of Pension Expense 3. Actual Return on Plan Assets Effect on Expense +- The actual return on plan assets is the increase in pension funds from interest, dividends, and realized and unrealized changes in the fair­market value of the plan assets. Chapter 18-40 LO 4 List the components of pension expense. Accounting for Pensions Accounting for Pensions Components of Pension Expense 4. Amortization of Prior Service Costs Effect on Expense + Plan amendments often increase benefits for service provided in prior years. The cost (prior service cost) of providing these retroactive benefits is allocated to pension expense over the remaining service­years of the affected employees. Chapter 18-41 LO 4 List the components of pension expense. Accounting for Pensions Accounting for Pensions Components of Pension Expense 5. Gain or Loss Effect on Expense +- Volatility in pension expense can result from sudden and large changes in the market value of plan assets and by changes in the projected benefit obligation. Chapter 18-42 LO 4 List the components of pension expense. Gains and Losses Gains and Losses Gain or Loss Unexpected swings in pension expense can...
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This note was uploaded on 04/02/2013 for the course ACCT 415 at USC.

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