F6 - Pension Plans, Post Retirements, & Deferred Compensations

Question 1

If the terms of a deferred compensation arrangement attribute all or a portion of expected future benefits to a period of service greater than one year, then…..

Answer 1

the cost of benefits should be recognized over that required period of service.

Example: Receive payment in year 6-8 for services done year 1-5. Expense evenly from year 1-5

Question 2

Funded Status=

Answer 2

Fair value of plan assets - Accumulated Post retirement obligation (APBO)
Positive amount - Asset
Negative amount - Liability

Question 3

Rules for prior service cost:

Answer 3

Under U.S. GAAP, amortization of unrecognized prior service cost is calculated by assigning an equal amount of the cost to the future periods of service of each employee at the date of amendment to the plan. The average service life of the four employees is five years.

Question 4

Under US GAAP, the service cost component of net periodic pension cost is measured used the:

Answer 4

Project Benefit Obligation

Service cost represents the increase in the PBO resulting from employees’ services rendered during the year

Question 5

Footnote disclosures in the FS for pensions require inclusions of:

Answer 5

1) A detailed description of the plan including employee groups covered
2) The components of period pension costs
3) The amount of unrecognized prior service cost

NOT INCLUDED: The differences between executive and nonexecutive plans

Question 6

How should plan investments be reported in a defined benefit plan’s financial statements?

Answer 6

At fair value

Question 7

The funded status of a defined benefit pension plan for a company should be reported in

Answer 7

The statement of financial position (B/S)