M2 - Pension Benefits : Part 2

Question 1

Be careful when calculating to look if it is a transition obligation or transition asset.

Answer 1

Transition assets and net gains decrease net periodic cost and

unrecognized prior service cost and transition obligations increase net periodic pension cost

Question 2

US GAAP requires that net gains and losses be reported as a component of accumulated other comprehensive income UNTIL recognized in net periodic pension cost through amortization. The current year amortization of the net gain would be recorded as a reclassification adjustment from AOCI with the following entry:

Answer 2

DR: Other Comprehensive Income
CR: Net Periodic Pension Cost

Question 3

Under IFRS, remeasurements of the defined benefit liability (asset), including remeasurements from actuarial gains, are reported in OCI and are not reclassified (amortized) to the income statement. (true or false)

Answer 3

true

The prior service cost is reported on the income statement. (Both current and prior)

Question 4

To calculate if a pension plan is over funded or underfunded:

Answer 4

You take

FV of Plan Assets

Negative number means underfunded (and its a liability)

Question 5

Companies are required to report the funded status of their pension plan on the statement of financial position as an asset or liability (or both). The statement of financial position is also known as the balance sheet. (true or false)

Answer 5

true

The funded status of a pension plan is the FV of plan assets less the PBO

Question 6

If a company has multiple defined pension plans, the funded status of each plan is calculated separately or together?

Answer 6

Separately