F7 Flashcards
Actual return on asset for pension plan
Beginning Assets \+Contribution \+Actual Return (squeeze) -Benefits paid =Ending balance
Accumulated Benefit Obligation
PV of future retirements payment based on current and past compensation levels
Projected benefit obligation
PV of future retirements payment based on current and past and FUTURE compensation levels
Return on Plan Asset (BS Asset) FV of Plan Asset
Beginning balance \+Contribution \+Return (market) -Benefits paid =Ending Balance
BS liability (Projected Benefit Obligation)
Beginning balance \+Service cost \+Interest cost \+Prior service Cost \+Actuarial losses -Actuarial gains -Benefits paid =Ending Projected Benefit Obligation
Unrecognized gain/loss is amortized over avg remaining service life.
Recognized only EXCESS OF 10% of PBO liabilities/Market Related Value (greater)
Unrecognized gain/loss
- 10% 0f PBO or Mkt related value (Greater)/# of years
=Amortization of unrecognized gain/loss
Amortization of Existing Net Obligation
Projected benefit obligation
-FV Plan Asset/15 years of Avg employee job life (greater)
=Minimum amortization
Net Periodic Service cost
+Service Cost Current
+Interest Cost (Discount RateBeg PBO)
-Expected Return on Asset (Expected RateBeg Assset)
+Amortization of Prior Service Cost (strait line)
-Amortize UNRECOGNIZED Gain/Loss in OCI (corridor greater 10%of Beg bal Asset or PBO ) If it’s less-Ignor
+Amortization of Existing Net Obligat/Asset FV/# years of 15
years (greater)
=Net Periodic Pension Cost
Funded Status
Asset- PBO
Actuarial gain/loss-include Net in PBO Base calculation
Amortization of Prior Service Cost/Existed Net obligations included in Net Periodic Pension Cost
Amortization of actuarial gain/loss
include in Net Periodic Pension Cost
PBO vs Plan Asset formula
The only similarity - Benefits paid
The rest of the components are different
Net Gain to be reported in OCI
Difference Actual Return on Asset (squeeze formula) - Expected Return on Asset (Beg FV of Asset*Expected Rate)
DR Pension Liability/Asset
CR OCI
Pension Gain/Loss can be recorded in OCI
Unrecognized Prior Service Cost -Increase of PBO DR OCI/CR Pension Obligation
Unrecognized Prior Gain
DR Pension Liability/CR OCI
Net Periodic Pension Cost
\+Service Cost \+Interest Beg PBO*Discount -!Expected Return on Asset \+Amortization of Unrec Cost/Avg years -! Amortization of Unrec Gain/Avg years
Under IFRS
Gain/Loss are not amortized from OCI to IS
Amortization of unrecognized gain in OCI is equal
Beginning of OCI
+CURRENT period gains
-Amortization (squeeze)
=Ending OCI balance
DO NOT INCLUDE GAIN FORM PRIOR PERIOD
Net Periodic Pension Cost is measured using
PBO. Service cost represents increase in PBO resulting from service in current yeat
FV PBO ending
Beg PBO \+Service Cost \+Interest \+Current Period Cost -Current Period Gain -Benefits Paid
Current/Prior period Gain/Loss and Amortizations run through
OCI
Prior Service Cost and Pension loses/ Gains Recognition in BS
JE Recognition
DR OCI (Goes to AOCI)
CR Pension benefit Asset/Liability
JE Amortization to SIRAGE
DR Net Periodic Pension Cost
CR OCI (Take out of AOCI)
JE Recognition of Gain
DR Pension Asset/ Liability
CR OCI
JE Amortization to SIRAGE
DR OCI
CR Net Periodic Cost
Pension Accounting Relationships
Income Statement SIRAGE
Balance Sheet BASE/PBO
Equity AOCI Unrecognized cost/gain/
Accumulated benefit obligation
Is not used to compute funded status
Pension Plan Liability Reported if
a negative funded status exists PBO and Asset as of end of the year
Reported in AOCI Amortization of the net gain decrease OCI (out of OCI, Reclass adjustment)
-Gain/ +Loss
Prior Service Cost (minus amortization)
Net transition asset/obligation
Amortization of prior service cost (Unrealized Prior cost sitting in OCI we need to more/amortize 1 year portion to Expense
DR Net Periodic Cost
CR OCI
Amortization of gain
1 JE DR Liability CR OCI 2 JE Amortization DR OCI CR Net Periodic Pension Cost
IF CURRENT PERIOD GAIN
DR Asset
CR OCI
Actuarial GAIN JE
DR Pension Liability
CR OCi
DR OCI
CR Net Periodic Pension Cost
Underfunded Plan (Liability) report non current. Report Current only shortage for next year payment
Pension plan with positive balance
Always reported as NON CURRENT Asset
A company will record DR to OCI in case of Amortization of prior period net gain
1) To record Gain DR Pension Asset CR OCI 2)Amortize prior period gain in future: DR OCI CR Pension Cost
JE CR to OCI will result from
JE for actual return higher than expected
DR Pension Asset/Liability
CR OCI (gain)
Do not take in to account Tax Rate
Calculating change in funded status (A-L)
Take in to account only: Prior Service Cost! IGNOR (It's Net Periodic Cost): Amortization of Net loss Amortization of Prior Service Cost
For Cunnent/Noncurret Assets Liability in BS
Use funded status
Attribution Period for Post retirement Benefits
From date of hire till date when employee became eligible and PRB assigned
Retained earnings
Net income
-Dividends declared
+/- Adjustments of prior period
+/- Accounting changes reported retrospectively
Gain/Losses on Treasure Stock
NEVER RECORDED IN INCOME STATEMEN
Gain-additional paid in capital
Loss-1st AP in Capital, then Retained earnings
JE for Treasury Stock Cost Method
Under Cost Method Ret Earnings NEVER GO UP, Gain Increase APIC
Use Ret Earnings only in Resell JE in Cost method
- Shares Issued
DR Cash
CR Common stock (par)
CR APIC Com Stock - Shares Purchased back
DR Treasury Stock (cost/Price)
CR Cash - Reissued Sold Back above cost NO RETAINED EARNINGS!
DR Cash
CR Treasury Stock(cost)
CR APIC (SP-Coast)
Reissue sold back below cost DR Cash DR APIC TS (FROM PRIOR JE) DR Retained Earnings above cost CR Treasury Stock
JE for Treasury Stok Par Value Method
Use Ret Earnings only in bought back par method
- Shares Issued
DR Cash
CR Common stock (par)
CR APIC Com Stock
2. Shares Purchased back DR Treasury Stock (par) DR APIC (Par-Issue price JE1) DR Retained Earnings (plug)excess of APIC CR Cash
- Reissue of shares
DR Cash
CR Treasury Stock
CR APIC (SP-PAR)
If Reissue below price DR APIC Treasure Stock 1st and then Plug Retained ernings
Book value per share common stock
Common stockholders Equity/Common Shares Outstanding
If reacquisition price is less than Par/original issue price gain CR to APIC
DR Treasury stock at par
CR APIC
CR Cash
If reacquisition price is more than Par/original issue price loss DR to Retained Earning
loss DR to Retained Earning
Participating preferred stock splits dividends with common stock shareholders only AFTER
Common stock shareholders received dividend equivalent to preferred stock dividends
JE to record the retirement of shares under cost method
DR Common stock #par
DR APIC #(SPpar)
DR Retained earnings (plug)
CR Treasury Stock # purchased price
Repurchasing common stock outstanding by issuer
Will lower total stockholders equity and total capital available, as the treasury stock is the contra asset account. Debt/ Equity account Increases
JE for stock retirement
DR Stock
CR APIC (plug)
CR Cash Paid
When you calculating Book Value per common share
Deduct Preferred Stock , Preferred St Dividends and Bonuses
In Reissuing (selling again) stock under cost method if price below cost
CR APIC
CR Ret Earnings (Remainder)
Under Cost Method
Only APIC T/S!
JE Stock Dividends Issued
DR Retained Earnings
CR Common Stock
Stock Dividends JE DR Retained Earning CR Common stock CR Paid in Capital
Small Stock Dividend less than 20%FMV
Dividends greater than 25% Par
Stock dividends declaration
FMV of stock dividend at declaration date transfers from Retained Earnings to Capital Stock and APIC.
Paid stock dividends
Increase APIC, Decrease Retained Earnings
Stock dividends and stock splits are not considered as income for recipients
Dividends are not recorded at FA in any method (Cost or Equity)
2 to 1 stock split
Double # of shares e.g. 100,00 beginning balance, after 2 to 1 split =200,000
Small stock dividend less than 20%
Reduce Retained Earnings at FV Price=#of shares*FV
DR Retained Earnings
CR Common Stock
CR APIC
Calculate # of common stock shares ISSUED
Issued shares (Do not reduce for treasury stock and do not include sold treasury stock)
Add + New stock issued
+Stock split if 2 to 1 (#*2)
If property dividends distributed
Take Market value- Book value to calculate gain/loss on disposal
Calculate the # of common stock shares outstanding
Issued
-Treasury stock
+Sold unissued previously
* Split 2 to 1
Cost of stock rights formula=
(FMV of rights/(FMV of rights+FMV of stock ex-rights))*Cost of Stock
At what amount Note Receivable s/b reported in BS?
If Note Receivable > 1 year
FV+interest accrued for all years*PV annuity factor
Benefit Pension Plan in OCI
Unrecognized Gain favorable for OCI
DR PBO (Liability)
CR OCI
Unrecognized prior period cost
DR OCI
CR PBO Liability
Government accounting
Government wide FS-Operational
Funds-Fiscal accountability
Net Cash receipts of bond issuance
Sales Price+Accrued interest if bond issued not in January-Bond Issuance cosrt
lower of cost or market
Middle value of:
- replacement cost
- market ceiling NRV (Price-Cost to complete)
- market floor NRV-Profit
GASB 34
Report additional and detailed info about primarily government
