F7 - M1 - Pension Benefits: Part 1

Question 1

Pension plans can be classified as (2)

Answer 1

defined benefit plans and defined contribution plans.

Question 2

As employees work, the _________ and ________ are necessary to determine the present value of the future payments due.

Answer 2

pension benefits accumulate and actuarial computations

Question 3

A defined benefit pension plan has two main components (2)

Answer 3

plan assets and pension plan liability.

Question 4

______ are the cash and investments set aside by the employer to pay retirement benefits.

Answer 4

Plan Assets:

Question 5

Plan assets are measured at _______.

Answer 5

fair value

Question 6

The change in plan assets during an accounting period is calculated as follows:

Answer 6

Beginning fair value of plan assets + Contributions
– Benefits paid to retirees
+ Actual return on plan assets Ending fair value of plan assets

Question 7

The _______ is the actuarial present value of the pension benefits owed to employees for current and past service.

Answer 7

Pension Plan Liability:

Question 8

_________ is the actuarial present value of benefits based on current and past compensation levels.

Answer 8

The accumulated benefits obligation (ABO)

Question 9

_________is the actuarial present value of benefits based on expected future compensation levels.

Answer 9

The projected benefit obligation (PBO)

Question 10

The change in the PBO during the accounting period is calculated as follows:

Answer 10

Beginning projected benefit obligation
+ Service cost
+ Interest cost
+ Prior service cost from current period plan amendments + Actuarial losses incurred in the current period
– Actuarial gains incurred in the current period – Benefits paid to retirees
Ending projected benefit obligation

Question 11

Under IFRS, the pension plan liability is called the _______________

Answer 11

defined benefit obligation (DBO)

Question 12

Under U.S. GAAP, net periodic pension cost (SIR AGE) is the net of six components:

Answer 12

+ Current service cost
+ Interest cost
– Return on plan assets
+/– Amortization of prior service costs (cost of retroactive benefits due to changes in plan)  +/– Amortization of gains/losses
+/– Amortization of existing net obligation or net asset at implementation of plan

Question 13

________ is reported as an operating expense on the income statement in the same line with other compensation costs arising during the period.

Answer 13

Service cost

Question 14

The other components of net periodic pension cost should be presented on the ________ separately or in total, below income from operations.

Answer 14

income statement,

Question 15

The other components of net periodic pension cost should be presented on the income statement, (3)

Answer 15

separately or in total, below income from operations.