F7 - Pensions and Equity Flashcards
Amortization of “Prior Period Service Costs” (pension costs): Calculation
Amortized equally over the period of service to be provided (average service life of employees)
Pensions: Service Costs component of net periodic pension cost is measured using what?
Projected Pension Benefit Obligation
Net Periodic Pension Cost: Calculation
+ S: Service Cost
+ I: Interest Cost (Beg PBO x discount rate)
- R: Expected Return on Plant Assets (Beg FV x
Expected Rate of Return)
+ A: Amortization of Prior Service Cost ( /service life)
+/- G: Amortization of Gains/Losses
- E: Amortization of transition asset
= Net Periodic Pension Cost
Minimum amount of unrecognized gain to effect pension expense: Calculation
Unrecognized Gain
- (> of FV of plant assets or PBO (*10%) ) (as of BOY)
= Excess
/Average Useful life
= Minimum Recognized Amount
Actual Return on plant assets: Calculation
Beg FV
+ Contributions
-Benefits Paid
+Actual Return (typically the squeeze)
=Ending Fair Value of Plant Assets
Pensions: Gain/Loss on Plant Assets Calculation
(Actual return - Expected return)
Pensions: PBO at the end of the year
Beginning Balance
+Interest
+Current Service Costs
-Benefits Paid During the year
=Ending Balance
Past Service Cost Recognition: IFRS
Recognized on income statement in year of plan amendment
Pension Costs that flow to OCI include?
Unrecognized Prior Service Costs (net of amortization)
Unrecognized Transition Obligation
(Unrecognized Net Gain)
Amortization of Net Gain
Increases Retained Earnings
As plant assets increase what happens to a companies PBO?
It decreases (liabilities decrease)
End of Year entry to OCI for PBO:
dr OCI (for amount amortized)
cr PBOFunded Status of Pension Plan: Calculation
(FV of plant Assets - PBO)
NOTE:
FV of Plant Assets + (Contributions) - (Benefits Paid during the year) + (Return on Net Assets)
if PBO > FV of Plant Assets = Underfunded
Funded Status of Pension Plan: Recorded and shown where?
Balance Sheet (statement of financial position)
IFRS Pensions: AOCI, what flows here?
Gains/Losses from Remeasurement
Changes in the funded status of pension plan because of an amendment must be recorded where?
AOCI
Recording prior service costs - dr AOCI (decreasing it)
Post Retirement Health Benefits and Pension Costs should be accrued by when?
The employee is fully eligible for the benefits.
Required Pension Disclosures:
- Components of period pension costs (SIRAGE)
- Amount of unrecognized prior service cost.
- Detail description of the plan
Which statements are allowed to be prepared but not required for Defined Benefit Pension Plans and Pension Plans?
Cash Flow Statement
Statement of Changes in Accumulated Plan Benefits includes what?
Impact of every factor that caused a change in the plan’s actuarial present value of plans benefit.
Include changes in:
- Actuarial assumptions
- Plan Amendments
- Benefits paid to beneficiaries
Pension Expense and the Plan’s Funded Status are reported where?
Pension expense: I/S
Funded Status: Notes
Neither shown on any financial related to the plan
When are Stock Options O/S reduced?
Exercise Date
Equity instruments issued to employees for services should be valued when?
Date of grant
How is compensation expense relative to stock options recognized?
Options not exercised: Recognize the expense evenly over the service period
