Pension Flashcards
Pension expense/pension cost
Dr/Cr PBO
Dr/Cr OCI - dEnt
➕service cost (given) \+/-prior svc cost PSC amortz ➕int cost ➖actual return in PA ➕deferred gain ➖excess amortz of deferred gain-/-loss \+/-amortz of existing Net Oblig or net A implementation =Pension Expense / Cost/ Accrued Liab/ Ending PBO
➕Service cost
- Actuarial PV of benefits attributed to svc perf during period
- ⬆️ in PBO in 1 yr
+/- Prior service cost PSC amortz
- costs assoc w svc yrs before plan amended
- calc= beg psc/ ave svc life (test). Or remaining svc life of ee expect d to receiv benefits
Test:
Total hrs/ #of employees
4 ees total of 20 yrs / 4 ees = 5
Cost of $100,000/ 5 = $20,000
➕ Interest cost
- ⬆️in PBO due to passsage of time
2. calc= beg PBO x disct rate (setlmt rate: rate at which plan’s oblig cb settld)
- VBO
- ABO: faithful
- PBO: relevant
VBO:1. vested and 2. not conting to cont employmt
Accumulated BO:
1. at curr. wages, 2. svc to date if ee cont emplymt till retirmt age or prior to tt date of retirement
Projected BO:
1. at salaries to be rcvd
GAAP: benefits-yrs-of-svc
IFRS: projected-unit-credit-method
Actual return on plan assets PA: Beg PA Dr. Contributions Cr. Benefits paid Dr. Actual return. Ending PA
Beg PA x actual return
- actual earnings of pension plan during period
- calc= end PA - beg PA - contribution made + benefits paid OR
- calc= beg FV of PA x actual return
(not changes in actuarial pv)
➕deferred gain (unrecog pension +gain/-loss) due to ST var from LT
- when actual investmt results differ from LR expected returns
- calc: return on PA - (beg PA x expected rate of return)
- diff accumulated to OCI
- actual return>, diff is added back to pension exp
- actual return
➖Excess amortz of Deferred -gain/+loss
- Unrecog g/l included in AOCI
- amortz of deferrals when gets too large (corridor)
Beg of period, the accumulated deferred g/l is comp to 10% of greater of beg bal in PBO or FV of PA
Beg def amt - 10% (higher of beg PBO or Beg PA) / ave svc life
If accumulated def g/ is larger than the greater of those 2, the excess is amortz
+/- amortz of existing net obligation or Net Asset at implementation
- if PBO > FV of PA, then amortz of net oblig will ⬆️ pension exp/cost
- if FV > PBO, then Net Asset amort will ⬇️ pension exp/cost. This amt sb amortz iver larger of 15 yrs or the ave remaining svc life
Funded status
Ending PBO - ending FV of PA at FYEnd
If overfunded: B/S non-current A
If underfunded: non-curr or curr L
Thus, funding status MAY NOT be netted
Any g/l not already recog as pension exp, are recog in AOCI net of tax
Pension presentation je to fund plan:
Dr pension exp
Dr p/p pension cost or
Cr accrued pension cost liability
Cr. Cash (overfunding)
To account change in PBO:
Beg of PBO:
Beg of PBO
+ service cost
+ interest cost
+/- psc or credit (from changes to plan in cu yr in full)
+/- actuarial g/l (from changes in actuarial assumpt)
- benefits paid
= end of year PBO
- amortz of psc, g/l and transition amts dont affect PBO in cu yr, but they affect pension exp for the year.
Post retirement benefit expense
\+ current svc cost \+ interest cost APBO - actual return on PA \+ amortz of psc - gain amortz or changes in APBO \+ amortz exp. transition amt (net oblig)(longer of 20 yrs or ave svc life)
= Net Post Retirement Benefit Expense/Cost
Post Retirement BO
Do not use PBO Use APBO (based on length of svc, not on wage)
Accrue if:
- probable and estimable
- accumulates or vests
- services already been perfrmd
post retirement Benefits Oblig differences
Per capita claims - unique
- Cost not gen. funded during svc period. So no A to acct for and cost usu include:
- only svc and
- int cost
- (and amortz of psc if plan has credits to ee for psc) - Obligation must be fully accrued by date ee is fully eligible for benefits. Qualify after certain # of yrs and not up to retirement
