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Unformatted text preview: u.ca/webct/ur w/lc5122001.tp0/cobaltM ainFr ame.dowebct 1/7 10/14/13 Blackboar d Lear ning System Read T opic 2: Ac c ount ing f or Pensions
Complet e Ac t ivit y 6- 2: Calc ulat ing Pension Expense
Part A: Prac t ic e Exerc ises
Read T opic 3: IF RS and GAAP Comparison
Complet e Assignment 6
Submit Assignment 6 f or grading
F ile: Outcomes
Mo dule 6: Pe ns io ns a nd Othe r ... Outcomes
By t he t ime you f inish your work on t his module, you should be able t o:
Def ine t erms used in ac c ount ing f or pensions.
Calc ulat e pension expense.
Use a worksheet t o det ermine pension expense and t he balanc e of pension- relat ed
ac c ount s.
Prepare journal ent ries t o rec ord pension expense.
Prepare t he required f inanc ial st at ement disc losure of pension c ost s.
F ile: Topic 1: Ov erv iew of Accounting for Pensions
Mo dule 6: Pe ns io ns a nd Othe r ... T opic 1: Overview of Accounting for Pensions
Many c ompanies promise t heir employees c ert ain benef it s af t er t hey ret ire; t he most c ommon
post - ret irement benef it is a pension. Companies provide t hese benef it s as part ial c ompensat ion
f or employees’ pre- ret irement servic es.
Post - ret irement benef it s are a f orm of def erred c ompensat ion. As suc h, t he mat c hing princ iple
requires t hat t he c ost of t hese benef it s must be rec ognized in t he periods during whic h t hey are
earned. Ac c ount ing f or pensions is very problemat ic f rom a measurement perspec t ive. T he
problem arises f rom t he f ac t t hat pension benef it s are of t en payable so f ar in t he f ut ure t hat it
is dif f ic ult t o measure t he c urrent c ost of t he amount t o be event ually paid out . Indeed, t he
employee may not even st ay wit h t he employer long enough t o rec eive t he benef it s.
Due t o t he measurement c omplexit y, t he pension plan hires an ac t uary t o predic t mort alit y
rat es, employee t urnover, int erest and earnings rat es, f ut ure salaries, and ot her relat ed f ac t ors.
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- Spring '13