Chapter 11 Flashcards
Income Statement – Pension Expense
\+ Service cost \+ Interest cost – Expected return on plan assets ± Amortization of net gain or loss ± Amortization of prior service cost or credit = Net periodic pension expense
How do you calculate interest costs of a PBO?
beginning BPO x discount rate = interest cost
How do you calculate expected returns on a BPO?
expected return = fair value X long term rate
in employee benefit pension plans assets are reported at?
fair value
IFRS Difference
How is interest income on plan assets recognized under IFRS
It is recognized as a profit or loss
IFRS Difference
Remeasurements of plan assets are recognized
As OCI
IFRS Difference
Amortization of prior service cost is recognized?
As a debit to OCI
Fair value of pension assets
\+ Beginning fair value \+ Contributions – Benefits paid ± Actual return on plan assets = Ending fair value
pension is underfunded
pension liability = PBO - Fair value of plan assets
pension is overfunded
pension asset = fair value of plan assets - PBO
The PBO at the end of a period is calculated as follows:
\+ Beginning PBO \+ Service cost \+ Interest cost \+ Prior service cost – Prior service credit – Benefits paid ± Changes in the PBO resulting from (a) experience different from that assumed (b) changes in assumptions = Ending PBO
JE for pension expense
DR. Pension expnese
CR. OCI
A defined benefit plan must present the following financial statements:
- A statement of net assets available for benefits
2. A statement of changes in net assets available for benefits
the benefit attribution period begins
on the date of hire
Define EPBO
is the actuarial present value at a given date of the other postretirement employee benefit
Define APBO
the actuarial present value at a given date of the OPEB attributable to the employee’s service as of that date.
accounting for compensated absences requires an accrual of a liability when four criteria are met
- The payment of compensation is probable.
- The amount can be reasonably estimated.
- The benefits either vest or accumulate.
- The compensation relates to employees’ services that have already been rendered.
sick pay only needs a liability if?
accrued only if the rights vest
the equation for accrued ESOP contribution
C = % X (income tax - C)
the measurement dare for ESOP shares using the fair value method?
The date options are granted.
How do you book the expense for employee stock options granted.
Calculate total and amortize it over vesting period
DR, Compensation cost
CR APIC
