The Rump Organization Essay

1232 Words Apr 22nd, 2014 5 Pages
MEMORANDUM

To: Dr. John J. Morris, Department of Accounting
From: Group #1 (Matt Meenen, Bailey Ochs, Allison Olive, Marit Pavek)
Date: 04/03/2014
Subject: Case 08-6, The Rump Organization

Statement of Relevant Facts:
The Rump Organization, a SEC registrant, is planning a corporate restructuring plan. On December 27, 2005 Ronald Rump, the CEO of the organization, along with the Board of Directors approved a plan to involuntarily terminate 100 of the organization’s employees. There is an option for each of the employees to sign a litigation waiver, which forfeits any right they have for legal action against Rump. In exchange for their voluntary signing of the waiver, Rump will offer each employee a lump-sum cash payment
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ii. “Plan identifies the number of employees to be terminated, their job classifications or functions and their locations, and expected completion date.” Rump’s plan includes 100 employees, the job classification, location of each employee, and a January 31, 2006 completion date. iii. “The plan establishes the terms of the benefit arrangement, including the benefits that employees will receive upon termination in sufficient detail to enable employees to determine the type and amount of benefits they will receive if they are involuntarily terminated.” The plan in the case explicitly states that the employees will receive termination benefits upon signing the litigation waiver on or before January 31, 2006. iv. “Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.” Rump concludes it’s unlikely the plan will have major changes or will be withdrawn.
b. Based on the above criteria being satisfied, ASC 420-10-25-8 states “if employees are not required to render services until they are terminated in order to receive the termination benefits (regardless of when they leave)….a liability for the termination benefits shall be recognized at the communication date.” As stated above our communication date is December 31, 2005 established by this codification section, after which employees can leave anytime which means their services are not required for termination

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