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30 Cards in this Set
- Front
- Back
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an arrangement whereby an employer provides benefits (payments) to retired employees for services they provided in their working years
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pension plans
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pension plan where... |
contributory pension plan
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pension plan where...
employer bears the entire cost |
noncontributory pension plan
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pension plan where...
offers tax benefits |
qualified pension plan
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pension fund should be a separate _____ and _____ entity
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legal and accounting
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the two most common types of pension planes are
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1. defined contribution plans
2. defined benefit plans |
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qualities of defined contribution pension plan
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employer contribution is fixed (determined by the plan,
risk borne by employees, benefits based on plan value |
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qualities of defined benefit pension plan
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employer contribution varies (determined by actuaries), risk borne by employer, |
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makes predictions (assumptions) of mortality rates, employee turnover, interest and earnings rates, early retirement frequency, future salaries, and any other factors necessary to operate a pension plan
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actuaries
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the deferred compensation obligation it has to its employees for their service under the terms of the pension plan
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pension obligation
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the difference between the fair value of the plan assets and the projected benefit obligation
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overfunded/ underfunded status
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where does the full overfunded/ underfunded status of their defined benefit pension plan get recognized?
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on the balance sheet
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does "service cost for the year" increase or decrease pension expense?
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increases
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does "interest on liability" increase or decrease pension expense?
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increases
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does "actual return on plan assets" increase or decrease pension expense?
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generally decreases
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does "gain or loss" increase or decrease pension expense?
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decreases or increases
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does "amortization of prior service cost" increase or decrease pension expense?
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generally increases
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actual return =
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(end plan assets balance - beg plan assets balance)
- (contributions - benefits paid) |
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which columns on a pension worksheet determine the journal entries to be recorded in the formal general ledger?
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general journal entries
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which columns on a pension worksheet maintain balances for the unrecognized pension items?
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memo record
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should a company recognize retroactive benefits as pension expense in the year of amendment?
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NO
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employers should recognize pension expense (PSC) over...
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over the remaining service lives of the employees who are expected to benefit from the change in the plan
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employers may use this method of amortization ______, but the board prefers the ______ amortization method
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straight line amortization
years of service method |
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unexpected swings in pension expense can result from:
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1. sudden and large changes in the fair value of plan assets
2. changes in actuarial assumptions that affect the amount of the projected benefit obligation |
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techniques for smoothing unexpected G/L on plan assets
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- include the expected return on the plan assets as part of pension expense, not actual return
- record asset and liability g/l in OCI G/L with previous years |
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FASB invented the corridor amortization approach for...
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amortizing the accumulated net gain or loss balance when it gets too large
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how large is too large? (corridor approach)
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10% of the larger of the beginning balances of the projected benefit obligation or the market related value of the plan assets
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any accumulated OCI G/L balance above _____ must be ______
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10%
amortized |
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which parts of pension plans are reported within the financial statements?
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- recognition of the net funded status of the plan
- classification of pension A/L - aggregation of pension plans - actuarial gains and losses/ PSC |
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which parts of pension plans are disclosed within the notes to the financial statements?
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1. major components of the pension expense
2. showing how the PBO and FV changed 3. disclosure of the rates used in measure the benefit amounts 4. table indication allocation by category 5. expected benefit payments to be paid/ estimated contributions to be paid 6. nature and amount of changes in PA and PBO 7. accumulated amount of changes in PA and PBO that will be recycled into NI in the future |
