FA Employee compensation

Question 1

DB overfunded definition & actions to take

Answer 1

Defined benefit overfunded means the plan assets > current obligation

we can either

1. reduced future funding
2. Reversion of funds

Question 2

Pension obligation

Answer 2

PV of future benefits earned by employee’s for service provided to date

Question 3

DC and DB, where do you report them?

Answer 3

DC - reported as expense on IS/ No BS effect

DB - Funded status - reported on BS

Question 4

Periodic Pension Cost under IFRS

Answer 4

Immediate recognition approach

1. service costs - PnL
2. Net Interest expense/income - PnL
3. Premeasurement - actuarial gains/ Losses/ difference between actual return on plan assets and expected return - recognized in OCI

Question 5

Periodic pension cost / GAAP (Deterral or amortization approach)

Answer 5

1. Service sot
   - current go to PnL
   - past go to OCI first then amortized to PnL over avg service lives of affected employees
2. Interest expense - return on plan assets
3. Remeasurements - actuals vs expected returns, treated as actuarial gains/losses - corridor approach -> OCI

Question 6

Corridor approach

Answer 6

Used when unreg Account gains/Losses continue to grow with no offsetting occurs

• amortized when balance grows too large
• at beginning of period, if net cumulative unrecog gains/losses > 10% of the larger of PO or FV plan asset

Question 7

Po Beginning of year to end of year formula

Answer 7

PO beg 
\+ current service cost 
\+ interest cost 
- Benefits paid
\+/- Past service costs / benefits
-/+ Actuarial gains/ Losses 

PO End of year