Employee Compensation Flashcards
What are the key dates for recognizing employee compensation
- Grant: Compensation is offered and accepted
- Vesting: Employee becomes entitled to compensation.
- Settlement: Compensation is given to employer
When is share based compensation recorded?
At fair value at grant date
Current Service Cost
It is the present value of benefits earned by the employees during the current period or it is the increase in the present value of defined benefit obligation as a result of employee service in the current period.
Interest Cost
It is the increase in the obligation due to the passage of time. Interest cost increases every
year regardless of whether the employee works another year or not. Interest cost is immediately recognized as a component of pension expense.
Interest Cost = Beginning PBO x Discount Rate
Net Interest Expense/Income
Net Interest Expense/Income = Beginning Funded Status x Discount Rate
A net interest expense represents the following cost of deferring payments related to the plan i.e. if underfunded - liability, then an expense is reported.
A net interest income represents the following income from prepaying amounts related to the plan i.e. if overfunded - asset, then an income is reported.
What is Fair value
Fair value is the estimated price at which an asset is bought or sold when both the buyer and seller freely agree on a price
What is “Planed assets”
Value of employees pension asset/fund
