F6

Question 1

What does Service Cost represent? pp

Answer 1

The increase in the PBO resulting from employees’ services rendered during the year

Question 2

What is accumulated benefit obligation

Answer 2

Current Salary

Question 3

How to calculate the interest cost in net periodic pension cost?

Answer 3

Beg PBO X Discount rate

Question 4

How to calculate the Return on plan assets n net period pension cost?

Answer 4

Beg FV of plan assets X expected rate

Question 5

Net transition assets and obligation effect on net periodic pension cost

Answer 5

Assets (Reduce)

Obligations (Increase)

Question 6

J/E for pension gains and deferred tax liability

Answer 6

DR: Pension benefit asset/liability
CR: OCI

DR: Deferred tax expense–OCI
CR: Deferred tax liability

Question 7

Company J/E for Pension plan contributions

Answer 7

DR: Pension benefit asset/liability
CR: Cash

Question 8

Fund Status Formula

Answer 8

FV of Plan Assets
- PBO
=Funded Status

\+ = overfunded
- = underfunded

Question 9

Accounting for G/L on PP under the corridor approach formula, which is…

Answer 9

Unrecog. g/l
- 10% of PBO or Market Related Value (greater)
=Excess
/ Avg remaining service life
=Amort of unrecog. g/l

Question 10

US GAAP requires unrecognized amounts to reported in AOCI …

Answer 10

After Tax

Question 11

Under IFRS, where is unrecognized prior sevice cost reported?

Answer 11

IS - Therefore no amortization

Question 12

When must post retirement health benefits be fully accrued?

Answer 12

By the date the employee is fully eligible for the benefits

Question 13

What is an attribution period?

Answer 13

Period of an employee’s service to which the expected postretirement benefit obligation for that employee is assigned

Question 14

Employee’s compensation for future absences (mostly vacay) should be accrued if:

Answer 14

1. Services have already been rendered, and
2. Obligation relates to vested or accumulated rights, and
3. Amt can be reasonably estimated, and
4. Payment is probable

Question 15

What does accrued compensated absences generally include?

Answer 15

“Vacation Pay” but not “sick pay.” Sick pay usually does not vest.

Question 16

What are some examples of FS income First and Tax Return Income Later? What is the result of these?

Answer 16

Tax Inc Later = Future Tax Liability

EX:

• Installment Sales
• Contractors Accounting (% of completed)
• Equity Method (undistributed dividends)

Question 17

What is the result of Tax return income first and FS income later? and Examples?

Answer 17

Tax Inc First = Prepaid Tax Benefit

-Prepaid Rent
-Prepaid Interest
-Prepaid Roylaties
“IRC uses the term Prepaid and GAAP uses the term “unearned”

Question 18

What is the result of FS Expense First and Tax Return Expense Later? Examples?

Answer 18

Tax Deduct Later = Future Tax Benefit

• Bad dept expense (allowance vs. direct w/o)
• Est Liability/warranty expense
• Start-up expenses

Question 19

What is the result of Tax return expense first and FS expense later? Examples?

Answer 19

Tax Deduct First =Future Tax Liability

• Dep Exp
• Amort of Franchise
• Prepaid Expense (cash basis of Tax)

Question 20

What is Def Tax Liability?

Answer 20

Future Tax Income > Future Financial Income

Question 21

What is a Def Tax Asset

Answer 21

Future Tax Income < Future Financial Accounting Income

Question 22

PBO Calculation

Answer 22

Beg PBO
+ Service Cost
+ Interest Cost
+ Prior Service Cost from current period plan amendments
+ Actuarial Losses incurred in current period
- Actuarial Gains incurred in current period
- Benefits pd to retirees
= Ending PBO

Question 23

Actual Return on Assets Calculation

Answer 23

Beg FV of plan assets
\+ Contributions
\+ Actual Return on Plan Assets
- Benefits paid to retirees
= Ending FV of plan assets

Question 24

Income Statement Expense Formula (SIRAGE)

Answer 24

S Current Service Cost (will be given)
I + Interest Cost (Beg PBO X Discounted Rate)
R (Actual or Expected) (Expected = Beg FV of plan assets X Expected Rate)
A Amortization of Prior Service Cost (Beg unrecogn prior service cost / avg remaining service life)
G and Losses
E Amort of Existing Net Obligations or Net Asset
= Net Periodic Pension Cost

Question 25

Accounting for G/L - Corridor Approach

Answer 25

Unrecognized g/l (beg of year)
-10% of PBO or Market Related Value (greater)
Excess
/ Avg remaining service life
Amort of unrecogn g/l

Question 26

J/E Pension Plan Contributions (BS acct)

Answer 26

DR: Pension plan asset/liab

CR: Cash

Question 27

Prior Service Cost and Pension Losses (AOCI)
J/E - Recognition in period incurred
J/E - Deferred Tax Asset

Answer 27

Prior Service Cost and Pension Losses = decrease the funded status of the pension plan
	DR: OCI (goest to AOCI)
	CR:	Pension benefit asset/liab
Deferred Tax Asset
	DR: Deferred Tax Asset
	CR: 	Deferred Tax Benefit -- OCI

Question 28

Prior Service Cost and Pension Losses

1. J/E - Amortization of pension exp
2. J/E - Deferred tax benefit must be removed

Answer 28

AMORTIZATION TO PENSION EXPENSE -reclassified out of AOCI and recog as a comp of pension expense
	DR: Net periodic pension cost
	CR: 	OCI - Take out of AOCI
Deferred Tax benefit must be removed
	DR: Deferred tax benefit - OCI
	CR: 	Deferred Tax benefit - IS

Question 29

Pension Gains

1. J/E Amortization to pension exp
2. Deferred TAx exp

Answer 29

AMORTIZATION TO PENSION EXPENSE	
	DR: OCI -- Take out of AOCI
	CR: 	Net periodic pension cost 
Deferred tax exp must be removed from AOCI and recorded on IS
	DR: Deferred tax exp -- IS
	CR:	Deferred tax exp --- OCI

Question 30

DTA -

1. J/E to record the taxes
2. J/E to record reversal of deferred tax asset

Answer 30

J/E to record the taxes
	DR: Deferred tax asset
	DR: Income tax expense -- current
	CR:	Income tax payable
	CR:	Income tax benefit - deferred
J/E to record reversal of deferred tax asset
	DR: Income tax expense - deferred
	CR:	Deferred tax asset

Question 31

DTL

1. J/E to record the taxes
2. J/E to record reversal of deferred tax liability

Answer 31

J/E to Record the taxes
	DR: Income Tax Expense - Current (IS)
	DR: Income Tax Expense - Deferred (IS)
	CR:	Deferred Tax Liability (BS)
	CR: 	Income Tax Payable	(BS)
J/E to reverse deferred tax liability
	DR: Deferred tax liability
	CR: 	Income Tax Benefit - deferred

Question 32

Valuation Allowance -

Answer 32

Valuation Allowance - if all of deferred tax asset will not be realized (NOT Permitted by IFRS)
J/E to record taxes
DR: Deferred tax asset
DR: Income Tax Expense - current
CR: Deferred tax asset valuation allowance
CR: Income tax benefit - deferred
CR: Income Tax payable

Question 33

COMPENSATION FOR FUTURE ABSENCES

Liability Recognition~

Answer 33

Liability Recognition

1. Services have already been rendered
2. Obligation relates to vested or accumulated rights, and
3. Amount can be reasonably estimated, and
4. Payment is probable

Question 34

How are vacation days and sick days accrued?

Answer 34

Vacation days are typically accrued- Sick days are usually not because they don’t vest

Question 35

Intraperiod Tax Allocation

Answer 35

Intraperiod Tax Allocation

I - Gross, then tax
DEA and PUFER – Net of Tax