Pensions

Question 1

Pension Liability = ?

Answer 1

PBO - FV of plan assets

Question 2

The funded status of a defined benefit pension plan appears in which statement?

Answer 2

The balance sheet

Question 3

Plan investments should be reported in a defined benefit plan’s financial statements at actuarial present value. TF

Answer 3

False. At fair value.

Question 4

Pension Asset = ?

Answer 4

FV of plan assets - PBO

Question 5

The PBO is increased by funding contributions and decreased by pension expenses. TF

Answer 5

True, these actions affect the PBO account

Question 6

What does a pension liability represent?

Answer 6

An unfunded projected benefit obligation

Question 7

What are the 5 components of pension expense?

Answer 7

1. Service Cost
2. Interest Cost
3. Expected return on plan assets
4. Amortization of prior service cost
5. Effect of gain or loss

Question 8

REDO How is pension service cost calculated?

Answer 8

(PV of the annuity for x amount of years (The retirement)) x PV of

Question 9

What is pension interest cost and how is it calculated?

Answer 9

The growth in PBO for the period. Beg PBO x Current Mkt Interest Rate

Question 10

What is “expected return on plant assets” and how is it calculated?

Answer 10

The expected growth in the pension fund for the year. Beg FV of plan assets x Expected Rate of Return on plan assets

Question 11

What is the formula for pension expense?

Answer 11

Service Cost + Interest Cost - Expected Return + Am. of a A. Loss + A of Unrec NO = Pension Expense

Question 12

What would be the JE for an increase in service cost for a service provided in the past?

Answer 12

dr. Prior Service Cost - OCI

cr. Pension Liability

Question 13

What two amortization methods are allowed by GAAP for PSC into pension expense?

Answer 13

Straight Line and Service Method

Question 14

An estimated increase in employee turnover would cause PBO to decrease. TF

Answer 14

True. Because estimated pension benefits are reduced.

Question 15

An increase in the FV of plan assets would cause an increase in the pension liability. TF

Answer 15

True. Because you are subtracting even more from the PBO. PBO - FV of plan assets = PL

Question 16

When an actuarial gain is recognized, pension liability is credited. TF

Answer 16

False. dr. Pension Liability cr. Pension Gain - OCI

Question 17

PBOs are subject to delayed recognition. TF

Answer 17

False. Changes in PBOs are recognized immediately.

Question 18

A journal entry to recognize an amortization gain causes what effect on pension liability?

Answer 18

No effect on pension liability

Question 19

A journal entry to recognize an amortization gain causes what effect on pension expense?

Answer 19

Decreases pension liability

Question 20

Amortization of PSC is subtracted from pension expense when trying to determine pension liability?

Answer 20

True

Question 21

The estimates of future contributions are a required disclosure of defined pension benefit plans. TF

Answer 21

False

Question 22

PBO stands for

Answer 22

Pension Benefit Obligation

Question 23

PBO = ? for IFRS?

Answer 23

DBO (Defined Benefit Obligation)

Question 24

What is the formula for DBL?

Answer 24

DBO - FV of plan assets = Funded Status, FS +/- Unrecognized Net Pension GL - Unrecognized PSC = DBL

Question 25

Under IFRS the vested portion of PSC, at PV, is recognized immediately in pension expense. TF

Answer 25

True

Question 26

Under IFRS the un-vested portion of PSC, at PV, is recognized immediately in pension expense. TF

Answer 26

False, it is gradually amortized to pension expense over the appropriate period.

Question 27

Under IFRS, firms have the option to recognize PSC in OCI or earnings. TF

Answer 27

False. Vested portion is recognized immediately as OCI and the unvested portion is amortized.

Question 28

Post-employment Benefit Obligation acctg is what type of acctg?

Answer 28

Accrual

Question 29

The primary measure of post retirement benefit obligation is…

Answer 29

Accumulated Postretirement Benefit Obligation (APBO)

Question 30

What is EPBO?

Answer 30

Expected Post-retirement Benefit Obligation. The PV of benefits expected to be paid based on the level of coverage the employees are expected to retain.

Question 31

Per capita claims costs are unique to post post retirement healthcare benefits. TF

Answer 31

True

Question 32

Components of changes in net assets available for benefits of a defined benefit pension plan trust, include: the net change in the ___ of each significant class of investments, contributions, and benefits paid. TF

Answer 32

FV

Question 33

Employer contributions are a part of pension expense. TF

Answer 33

False

Question 34

Amortization of unrecognized PSC is added to the pension expense formula. TF

Answer 34

True, it is part of the expense

Question 35

Things that are traditional expenses are ____ when computing pension expense, and items that are traditional revenues or gains are ____ to pension expense.

Answer 35

Added, subtracted

Question 36

What is the general formula for pension expense?

Answer 36

Service Cost
\+ Interest Cost
\+ Actual return on plan assets
\+ Amortization of unrecognized PSC
= Pension Expense

Question 37

IFRS requires the use of what method to calculate the PV of the defined PBO?

Answer 37

projected unit credit method