F7 (Pension Benefit, Retirement Benefit, SE)

Question 1

PBO and ABO: (GAAP)

Answer 1

• PBO = future salary levels
• ABO = actuarial PV CY and PY levels

**DBO = IFRS (similar to PBO in GAAP)

Question 2

for the AGE in “SIR AGE”, JE for each year exp: [for net loss and gains]

Answer 2

[net loss]
Dr Net Per Pen Cost (AGE)
Cr OCI

Dr DTB-OCI
Cr DTB-IS

[net gain]
Dr OCI (AGE)
Cr Net Per Pen Cost

Dr DTE-IS
Cr DTE-OCI

Question 3

S of “SIR AGE” is recorded as OpEx on IS; JE:

Answer 3

Dr comp exp

Cr pension benefit A/L

Question 4

IR of “SIR AGE” is recorded:

Answer 4

"R": (actual > expected)
[CY]
Dr pension ben A/L
Cr OCI
[NY]
Dr OCI
Cr Net Per Pen Cost

Question 5

JE for contribution to a plan:

Answer 5

Dr Pension Ben A/L

Cr Cash

Question 6

amortization of existing net obl/NA at implenetation “E” of SIRAGE:

Answer 6

[+amort of obligation]
[-amort of NA]
calculation:
PBO - FV = initial unfunded/ / 15Y or avg emp job life (greater of) = min amortization

Question 7

DBPP disclosures should include:

Answer 7

-funded status of plan (face of BS)
- amt of Net Per Pen Cost for the period
FV Plan Assets

Question 8

corridor approach “G”: [use market-related value of assets]; if not present, use FV plan assets

Answer 8

unrecog’d G/L - 10% PBO/FV (greater) = excess;
*excess / avg svc life = amort’d G/L

**if 10% PBO/FV > unrecog’d G/L, then no amortization will be taken

Question 9

a company providing HC benefits for its retirees should disclose:

Answer 9

• assumed HC cost trend rate used to measure the expected cost of benefits covered by the plan (actuarial assumptions)
• APBO

Question 10

TS cost method:

Answer 10

[both methods]
*initial JE issuance:
Dr Cash SP
Cr CS par
Cr APIC-CS

[cost method]; resell
*repurchase JE:
Dr TS (cost)
Cr Cash

*resell above JE:
Dr Cash SP
Cr TS (cost)
Cr APIC-TS (SP-cost)

*resell below JE:
[loss is APIC-TS+RE SP - cost]
Dr Cash SP
Dr APIC-TS (if any)
Dr RE (plug)
Cr TS (cost)

Question 11

TS par method:

Answer 11

[both methods]
*initial JE issuance:
Dr Cash SP
Cr CS par
Cr APIC-CS

[par method]; repurch

*repurch above issue price JE:
Dr TS (par-CS)
Dr APIC-CS (par)
Dr RE (issue-PP)
Cr Cash (PP)

*repurch below issue price JE:
Dr TS (par-CS)
Dr APIC-CS (par)
Cr Cash (PP)
Cr APIC-TS (issue-PP)

*resell above/below JE:
Dr Cash (SP)
Cr TS (par-CS)
Cr APIC-CS (plug)

Question 12

cost vs par method (RE and APIC comparison):

Answer 12

compared to cost method, par method will report lower amount for APIC and same amount for RE if:

• repurch TS > par

Question 13

CD JE’s:

Answer 13

Declaration date:
Dr RE
Cr D/P

record date:
NO JE

Pmt date:
Dr D/P
Cr Cash

Question 14

property div JE:

Answer 14

Dr RE (FMV)
Cr FA

Question 15

Stock div:

Answer 15

less than 20-25%:
Dr RE (FMV)
Cr CS (par)
Cr APIC (plug)

greater than 20-25%:
Dr RE (par)
Cr CS

Question 16

liquidating dividends:[div in excess of RE]; Dividends > RE

Answer 16

• no JE according to final review?
• pure liquidating dividend: No JE

*liquidating div with excess:
Dr RE (80%)
Dr APIC (20% - ROC)
Cr Cash (100%)

Question 17

stock splits/reverse splits:

Answer 17

no JE

Question 18

retirement of TS: [decrease of CS, no cash involved]

Answer 18

[cost method]
Dr CS (par)
Dr APIC-CS (SP-par)
Dr RE (plug)
Cr TS (cost)

[par method]
Dr CS (par)
Cr TS

Question 19

donated TS:

Answer 19

Dr Donated TS (FMV)
Cr APIC

*if sold:
Dr Cash (SP)
(Dr APIC if sold less than FMV)
(Cr APIC if sold greater than FMV)
Cr Donated TS (BV or FMV)

Question 20

RE calculation:

Answer 20

BB
+NI/-NL

+/- PPA
+/- Acct changes (cumu effect)

+ adjustment from “quasi-reorg”
= EB RE