M4 - Financial Statements of Employee Benefit Plans

Question 1

The statement of changes in net assets available for benefits shows:

Answer 1

-the appreciation in the FV of investments
-any other investment income
-investment expenses
-contributions
-benefits paid
-administrative expenses
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to arrive at the net increase or decrease in net assets available for benefits during the period.

The change in actuarial PV of accumulated plan benefits is shown on the statement of changes in accumulated plan benefits.

Question 2

The difference in executive and non executive plans is not a required disclosure in the F/S for pensions. (true or false)

Answer 2

true

The components of net periodic pension cost
The amount of unrecognized prior service cost
A detailed description of the plan including employee groups covered.
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These are all required disclosures

Question 3

How should plan investments be reported in a defined benefit plan’s financial statements?

Answer 3

At Fair Value

Question 4

Which F/S is required for both defined benefit pension plans and defined contribution pension plans?

• Statement of Changes in Net Assets Available for Benefits
• Statement of Accumulated Plan Benefits

Answer 4

-Statement of Changes in Net Assets Available for Benefits

In addition, defined benefit pension plans (NOT defined contribution pension plans) are also required to prepare Statement of Accumulated Plan Benefits and Statement of Changes in Accumulated Plan Benefits.

Question 5

Which defined pension plan F/S would a pension plan’s interest income be reported?

Answer 5

The statement of changes in net assets available for benefits shows the causes of the changes of a plan’s assets, which would include the causes of increases such as investment income (including interest income), appreciation of plan assets, and employer contributions, as well as the causes of decreases such as benefits paid to beneficiaries and administrative expenses.

Question 6

Is a statement of cash flows required by both defined benefit pension plans and defined contribution pension plans?

Answer 6

No, but it may be prepared, but they are not required to do so.

Question 7

The statement of changes in accumulated plan benefits shows the impact of every factor that caused a change in a plan’s actuarial PV of plan benefits, including

• changes in actuarial assumptions,
• the effect of plan amendments,
• and the amount of benefits paid to beneficiaries.

(true or false)

Answer 7

True

However, the appreciation of a plan’s assets would have no effect on the plan’s actuarial present value of plan benefits and would thus not be included on the statement of changes in accumulated plan benefits