Post-employment compensation

Question 1

Regulation for which of the two - DBP and OPB - is typically more strict and what may be one of the reasons?

Answer 1

usually companies are not required by regulation to fund an OPB to the same extent as DBP. part of the reason is that governments often insure DBP through some means, but not OPB.

Question 2

define pension obligation

Answer 2

present value of future benefits earned by employees to date

Question 3

how pension obligation is referred to under IFRS and GAAP?

Answer 3

• IFRS: present value of defined benefit obligation (PVDBO)
• GAAP: projected benefit obligation (PBO)

Question 4

define current service cost

Answer 4

current service cost is an increase in pension obligation as a result of employees service in the current period

Question 5

how changes in pension obligation resulting from change in estimation parameters (assumptions) are treated in financial statements?

Answer 5

as accrual gains/losses

Question 6

funded status equation

Answer 6

funded status = fair value of plan assets - PVDBO

Question 7

periodic pension cost equation

Answer 7

PPC = contributions in the period - change in funded status for the period

Question 8

breakdown of PPC under IFRS and respective section in the financial statement (P&L / OCI)

Answer 8

PPC = service costs (P&L) + net interest expense (P&L) + remeasurement (OCI)

Question 9

how PPC is treated under GAAP as compared to IFRS?

Answer 9

• service costs -> current service costs (P&L) + past service costs (OCI)
• net interest expense -> interest expense (P&L) - expected return on assets (P&L)

Question 10

What is the relationship (e.g. positive or negative) between the risk free rate and estimated fair value of a stock option

Answer 10

Realtionship is positive

Question 11

Is capitalization of periodic pension cost included in the value of ending inventory allowed under GAAP?

Answer 11

yes, it is included in the COGS