Module 13d

Question 1

What is a defined contribution plan?

Answer 1

Employeer agrees to make a defined contribution to a pension plan as determined by the provision of the plan. (401k)

Question 2

What is a defined Benefit plan?

Answer 2

employer agrees to provide a benefit at retirement that is devined or fixed by a formula (uses a Actuary to determine the amount)

Question 3

What is pension expense?

Answer 3

The net amount of the following factors: 1) Service cost 2) Interest on projected benefit obligation 3) return on plan assets 4) Amortization of unrecognized prior service cost or credit. 5) effect of gains and losses

Question 4

What is service Costs?

Answer 4

PV of benefits attributed by the pension benefit formula to employee service during the current period (must take future salary levels into consideration).

Question 5

What is the interest on the projected benefit obligation(PBO)?

Answer 5

it is the increased in the amount of the PBO due to the passage of time.

Question 6

How do you calculate the interest component of the PBO?

Answer 6

You take the beginning PBO * The settlement rate the actuary is using

Question 7

What is the actual return on plan assets?

Answer 7

difference in the fair value of the plan assets at the beginning and the end of the period adjusted for contributions made to the plan, and benefit payments made by the plan during the period

Question 8

What is the formula for the actual return?

Answer 8

End Bal at FV + Benefits paid - Beg balance - Employer contributions

Question 9

What is the result of a negative actual return?

Answer 9

You would add it to Pension expense

Question 10

What is the result of a positive actual return?

Answer 10

You would deduct it from pension expense

Question 11

What are prior service costs?

Answer 11

retroactive adjustments that are granted to recognize services rendered in previous periods

Question 12

The amount of the unrecognized prior service cost that would be amortized over future periods as a resulf of an amendment is determined by?

Answer 12

Subtracting the after amendment projected PBO from the before amendment

Question 13

When are prior services costs most likely incurred?

Answer 13

When plans are ammended after that are put into place

Question 14

What is the method of amortizing prior service costs?

Answer 14

You use the straight-line basis over the average remaining service period

Question 15

What is the gain of loss portion of Pension expense?

Answer 15

It is the difference between the actual and expected return on plan assets

Question 16

In a disclosure you have to reconcile the beginning PBO to ending PBO what is that formula?

Answer 16

Beginning PBO + service costs + Interest Cost +-prior service cost +-actuary gain/loss - benefits paid

Question 17

How do you determine if the PBO is under or over funded?

Answer 17

You take the beginning PBO - Service costs - Interest Costs + Benefits paid to get the Ending PBO that you compare with the FMV of plan assets at period end date

Question 18

What are the major differences between pensions and health care benefits?

Answer 18

Pensions are generally funded, have a well defined and level dollar amount, are payable monthly, and too retiree and surviving spouse. Health care benefits, are not funded, vary greatly, an benefit more than just the retiree and spouse. They are paid as needed and it it difficult to predict the costs

Question 19

Does the accumulated benefit obligation have anything to do with future compensation levels?

Answer 19

No

Question 20

How do you calculate the amount of pension liability that should be shown?

Answer 20

Take the PBO - FV of plan assets

Question 21

What is the differences to calculate the projected benefit obligation for IFRS?

Answer 21

GAAP uses Benefits-years-of service. IFRS uses projcted benefit credit method

Question 22

Does IFRS use accumulated benefit obliation?

Answer 22

No it is called accrued benefit obligation

Question 23

What is the extra component of pension cost that is not used under Gaap?

Answer 23

Effects of curtailments and settlements

Question 24

what is the discount rate used for GAAP and IFRS?

Answer 24

GAAP uses the settlement rate, IFRS uses a rate determined by the market yields at the end of the reporting period

Question 25

Must IFRS immediately recognize all actuarial gains/losses?

Answer 25

Yes, After Jan 1, 2013

Question 26

Does IFRS allow you to net pension assets and liabilities?

Answer 26

Yes, if there is a leagally enforceable right ot use the assets of one plan to settle the obligations of another plan

Question 27

If the plan is overfunded, where is the overfunded portion presented on the balance sheet?

Answer 27

It is presented as a noncurrent asset.

Question 27

Is the discount rate used to calcualte the PBO determined by 1) The expected return on plan assets, or 2) the actual return on plan assets.

Answer 27

Neither it is the implicit rate at which the pension benefit could be settled

Question 28

If the plan is underfunded, where do you record the amount on the balance sheet?

Answer 28

You record either a current liability, a noncurrent liability, or both.