F6

Question 1

What is a funded pension plan?

Answer 1

sponsor company makes contributions

Question 2

What are the non-GAAP methods for pension plans?

Answer 2

pay as you go (expense) or terminal funding (buy annuity)

Question 3

What are the GAAP methods for pension plans?

Answer 3

Defined contribution or defines benefit plan

Question 4

What is accumulated benefit obligation?

Answer 4

ABO = use current salary

Question 5

What is projected benefit obligation?

Answer 5

PBO = guess future salary

Question 6

What are prior service costs?

Answer 6

costs of benefits on past services b/c retroactive application of plan initiation or amendment

Question 7

How do you calculate PBO?

Answer 7

Beg + service cost + interest cost + prior service cost + actuary losses – actuary gains – benefits paid = end

Question 8

Pensions v. Leases.

Answer 8

Pensions are Great! Leases use “lesser”

Question 9

How do you calculate Net Periodic Pension Cost?

Answer 9

SIR AGE = Service Cost + Interest Cost – Return on Plan Assets + Amort PSC – Gains (Losses) + Amort Existing L or A = Net Periodic Pension Cost

Question 10

What is the S in SIR AGE?

Answer 10

S = Service Cost = given = PV of benefits earned in current period

Question 11

What is the I in SIR AGE?

Answer 11

I = Interest Cost = Beg. PBO * Discount Rate %

Question 12

What is the R in SIR AGE?

Answer 12

R = (Return on Plan Assets) = actual or expected

Question 13

How do you calculate the actual return?

Answer 13

Beg FV + Contributions + Actual Return – Benefits Paid = End FV

Question 14

How do you calculate the expected return?

Answer 14

Beg FV x expected rate = expected return

Question 15

What is the A in SIR AGE?

Answer 15

A = Amort of Unrecognized PSC = Beg. Unrecognized PSC / Avg remaining service life

Question 16

What is the G in SIR AGE?

Answer 16

G = (Gains) and Losses = diff between actual and expected return, or G/L from change in actuary assumptions

Question 17

How do you account for Gains or Losses

Answer 17

I/S or OCI w/ corridor approach

Question 18

What is the corridor approach?

Answer 18

Unrecognized G/L – greater of 10% of (PBO or market relative value) = excess / avg remaining service life = amort G/L

Question 19

What is the E in SIR AGE?

Answer 19

E = Amort Existing Net L or A = amort over greater of (15 years or avg remaining service life)

Question 20

Where are unamortized AGE recorded?

Answer 20

AOCI

Question 21

What is the funded status?

Answer 21

FV – PBO

Question 22

What is a pension plan asset?

Answer 22

noncurrent, overfunded: FV > PBO

Question 23

What is a pension plan liability?

Answer 23

Current, noncurrent, or both. underfunded: FV < PBO

Question 24

How do you calculate ending funded status?

Answer 24

Beg Funded Status + Contributions – SIR AGE = End funded status

Question 25

What is a pension settlement?

Answer 25

sell assets & buy annuity contracts

Question 26

What is curtailment?

Answer 26

service life decreases, or future benefits decrease

Question 27

What are termination benefits (formula)?

Answer 27

lump sum payments + PV termination benefits = special term benefit

Question 28

Disclosure

Answer 28

More = better. NOT repeat or too positive

Question 29

What are the requirements for accrual/liability recognition?

Answer 29

obligation is for services already rendered. Employee rights accumulate/vest. Payment is probable. Benefit can be reasonably estimated

Question 30

What is APBO?

Answer 30

Accumulated Postretirement Benefits Obligation = PV of future benefits known today

Question 31

What is EPBO?

Answer 31

Expected Postretirement Benefits Obligation = PV of future benefits expected = APBO + PV unknown

Question 32

What is the attribution period?

Answer 32

hire date through full eligibility date

Question 33

How is the Net Postretirement Benefit Cost calculated?

Answer 33

SIR AGE = Service Cost + Interest Cost – Return on Plan Assets + Amort PSC – Gains (Losses) + Amort Existing L or A = Net Periodic Pension Cost

Question 34

What is the E in SIR AGE for postretirement benefits?

Answer 34

E = Expense/Amort of Transition Obligation = expense full amt or (min amt = APBO – FV = Initial unfunded / 20 yrs or avg service life remaining)

Question 35

What is the liability recognition for deferred compensation?

Answer 35

at PV of benefits expected to date

Question 36

When are sick pay benefits accrued?

Answer 36

only when vested

Question 37

How is intraperiod tax allocation recorded?

Answer 37

IDEA & OCI (PUFE)

Question 38

What are the differences for interperiod tax allocation?

Answer 38

Permanent = current, not deferred. Temporary = current & deferred

Question 39

What is the income tax expense?

Answer 39

Expense = owe now (TI \* tax %) + owe later (temp diff \* future enacted %)

Question 40

What is a deferred tax liability (DTL)?

Answer 40

when tax deduct first, or F/S income first

Question 41

What is a deferred tax asset (DTA)?

Answer 41

gift certificate. Tax paid \> expense. Use valuation allowance

Question 42

What is a valuation allowance?

Answer 42

Contra-account to DTA. Used if part of DTA is more than likely (\>50%) not going to be used (IFRS = probable)

Question 43

What are uncertain tax provisions?

Answer 43

aggressive income tax positions

Question 44

What are the steps in uncertain tax provisions?

Answer 44

Step 1) test more likely than not if taken to highest court. Step 2) recognize largest tax benefit w/ 50%+ likelihood

Question 45

How do you treat changes in the enacted tax rate?

Answer 45

change in estimate. To IDEA

Question 46

How are the DTL/A classified?

Answer 46

Follow mama. Noncurrent/current. If no mama, use reversal date expected

Question 47

How are the DTL and DTA netted?

Answer 47

net current. Net noncurrent