Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Copy #1 > Pensions & Taxes > Flashcards

Pensions & Taxes Flashcards

1
Q

What is the difference between contributory & noncontributory pension plans?

A

Contributory = employees required to contribute

Noncontributory = Only employer can contribute

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is the difference between overfunded vs. underfunded pension plans?

A

Overfunded = more assets than liabilities

Underfunded = more liabilities than assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are the two types of Non-GAAP pension plans?

A

Pay as you go & terminal funding

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the two types of GAAP pension plans?

Which plan is used most often for CPA?

A

Defined contribution plan & defined benefit plan

Defined Benefit Plan is used more

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is the difference between accumulated benefit obligation (ABO) & projected benefit obligation (PBO)?

Which one is used more more for the CPA?

A

ABO = current salaries only

PBO = future salaries

PBO is used more

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Formula for Ending PBO:

A 
Beg. PBO
\+ service cost
\+ interest cost
\+ prior service cost
\+ actual losses
- actual gains
-benefits paid
= Ending PBO
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Formula for Ending FV of Plan Assets:

A 
Beg. FV of plan assets
\+ contributions
\+actual return on plan assets
- benefits paid
= Ending FV of plan assets
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Formula for Net Period Pension Cost:

A

“SIR AGE”

\+ service cost
\+ interest cost
- return of plan assets
\+ amortization of prior service cost
- gains or + losses
\+ amortization of existing net obligation or - net asset
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the JE on the I/S for recording the net periodic pension cost?

A

DB: Net periodic pension cost
CR: pension benefit liability
CR: OCI

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Formula for Service cost:

A

Service cost will be provided by actuary.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Formula for Interest cost:

A

Beg. PBO * discount rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Formulas for Return on Plan Assets:

A 
Actual Return: 
Beg. FV of plan assets
\+ contributions
\+ actual returns (squeeze)
- benefits paid
= ending FV

Expected Return:
Beg. FV of plan assets * expected rate of return

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Formula for Amortization of prior service cost:

What is the difference using this with IFRS?

A

Beg. unrecognized prior service cost / avg. remaining service life

IFRS - the entire service cost is booked into IS and not unrecognized to OCI

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are the two ways to determine a gain or loss?

A

1) Difference between expected & actual return on plan assets
2) Actual gains & losses in period

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Formula for amortizing gains/losses on IS:

A

Corridor approach:

Total gain/loss
- greater of 10% of PBO or 10% of FV plan assets
= Excess
/ avg. remaining service life
= Amortization of gain/loss
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Formula for amortization of existing net obligation or net assets:

A 
PBO
- FV plan assets
= initial unfunded obligation
/ 15 years OR avg. employee job life
= amortization
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

On the B/S, what is the JE for a pension plan contribution?

A

DB: Pension benefit assets/liability
CR: Cash

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Formula for funded status of pension plan:

A

FV of plan assets
- PBO
= Funded status

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

How are overfunded and underfunded pensions reported in IS?

A

Overfunded = noncurrent asset

Underfunded = noncurrent liability & curent liability if expected future benefits exceed the FV of plan assets

20
Q

Formula for ending funding status:

A 
Beg. funding status
\+ contributions
- service cost
- interest cost
\+ expected return on plan assets
- prior service cost
\+ net gains
- net losses
= ending funded status
21
Q

Which of the pension costs must be recorded within the B/S first before moving to the I/S?

A

“AGE”

Prior pension, gains/losses, net obligation/net assets

22
Q

In the B/S, what is the JE for prior service cost & losses?
In the B/S, what is the JE for this deferred tax asset?

A

DB: OCI
CR: Pension benefit asset/liability

DB: Deferred tax asset
CR: Deferred tax benefit - OCI

23
Q

In the I/S, what is the JE when amortizing out of the B/S the prior service cost & losses?
What is the deferred tax JE?

A

DB: net periodic pension cost
CR: OCI

DB: Deferred tax benefit - OCI
CR: Deferred tax benefit - I/S

24
Q

In the B/S, what is the JE for gains?

In the B/S, what is the JE for this deferred tax liability?

A

DB: Pension benefit asset/liability
CR: OCI

DB: Deferred tax expense - OCI
CR: Deferred tax liability

25
Q

In the I/S, what is the JE when amortizing out of the B/S the gains?
What is the deferred tax JE?

A

DB: OCI
CR: Net periodic pension cost

DB: Deferred tax expense - I/S
CR: Deferred tax expense - OCI

26
Q

What is a pension plan settlement?

A

Pension plans assets are sold and proceeds are used to buy annuity contracts

27
Q

What are termination benefits?

How are they calculated?

A

Employees are paid to terminate rights to future pension payments

Lump sum payments + PV termination benefit

28
Q

Under IFRS, how is prior service cost recorded?

A

Recorded in the current year I/S only.

29
Q

Under IFRS, how is gains recorded?

A

Recorded in AOCI only, not amortized to I/S.

30
Q

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

A

At fair value.

31
Q

The funded status of a defined benefit pension plan should be reported in?

A

The statement of financial position (B/S)

32
Q

What are the two type of tax differences?

What periods do they affect?

A

Permanent: Current only
Temporary: Current & Deferred

33
Q

Formula for Current Tax Liability?

A

Tax Return amount * Current tax rate

34
Q

Formula for Deferred Tax Liability/Asset?

A

Temporary Differences * Future Enacted Tax Rate

35
Q

Formula for I/S Total Tax Expense?

A

Current Tax Liability
+ Deferred Tax Liability OR
- Deferred Tax Asset

36
Q

Examples of permanent differences?

A 
Tax-exempt interest (municipal, state)
Life insurance proceeds & premiums when beneficiary
Penalties & Fines
Dividend received deduction
Nondeductible items
37
Q

What makes up a deferred tax liability?

A

Future tax accounting income > future financial accounting income

38
Q

What makes up a deferred tax asset?

A

Future tax accounting income < future financial accounting income

39
Q

What are the JE to record Income tax liability? Income tax expense?

A

DB: DTA OR
CR: DTL
CR: Income Taxes Payable

DB: Income tax expense current
DB: Income tax expense Deferred OR
CR: Income tax benefit Deferred

40
Q

What are examples of revenues included in taxable income first (DTA)?

A

Unearned revenues

41
Q

What are examples of expenses included in taxable income first (DTL)?

A

depreciation
prepaid
amortization

42
Q

What are examples of revenues included in financial income first (DTL)?

A 
installment sales
equity method (dividends)
43
Q

What are examples of expenses included in financial income first (DTA)?

A

bad debt expenses
start-up expenses
warranty expenses

44
Q

How do you treat operating losses?

A

Carried back 2 years or carried forward 20 years and apply against taxable income

45
Q

Under current generally accepted accounting principles, which approach is used to determine income tax expense?

A

Asset and liability approach

Copy #1 (35 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions