F6: Notecards (General) Flashcards
Cost of retiree health and other post retirement (and post employment!) benefits must be accrued IF: (4 things)
1- obligation is attributable to services already rendered
2- employee’s rights accumulate or vest
3- payment is probable
4- amount of benefits can be reasonably estimated
APBO
Accumulated Postretirement Benefit Obligation
- PV of future benefits that have vested as of the measurement date
- Discounted at an assumed discount rate
EPBO
Expected Postretirement Benefit Obligation
-PV of future benefits expected to be paid as of the measurement date
EPBO includes (2 things)
1- APBO plus
2- PV of expected future benefits not yet vested
How to account for postretirement benefits other than pensions in the Income Statement:
Benefit-years-of-service approach is used
Transition to accrual accounting done in one of two ways for postretirement benefits other than pensions:
1- Immediately expense as the effect of a change in accounting principle
2- Delayed recognition using straight-line amortization over 20 years
How to account for postretirement benefits other than pensions in the Balance Sheet:
Funded Status =
FV of plan assets
- APBO
= Funded status
Postemployement Benefits definition
Benefits paid to employees after their employment but before retirement
-NOT the same as post retirement benefits
Examples of post employment benefits
- Salary continuation
- Severance benefits
- Continuation of other fringe benefits (insurance)
- Job training
- Disability related stuff (workers comp)
2 types of deferred compensation and how accounted for
1- pension
2- post retirement plans
accrual basis
When to accrue for compensation for future absences (sick and pto)
Accrued in the year earned if ALL met:
- attributable to services already rendered
- obligation relates to rights that vest OR accumulate
- payment is probable
- amount is reasonably estimated
When to accrue for sick pay
ONLY if vesting
