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30 Cards in this Set

  • Front
  • Back
an arrangement whereby an employer provides benefits (payments) to retired employees for services they provided in their working years
pension plans

pension plan where...

employees voluntarily make payments to increase their benefits
contributory pension plan
pension plan where...

employer bears the entire cost

noncontributory pension plan
pension plan where...

offers tax benefits

qualified pension plan
pension fund should be a separate _____ and _____ entity
legal and accounting
the two most common types of pension planes are
1. defined contribution plans

2. defined benefit plans

qualities of defined contribution pension plan
employer contribution is fixed (determined by the plan,

risk borne by employees,

benefits based on plan value

qualities of defined benefit pension plan

employer contribution varies (determined by actuaries),

risk borne by employer,

benefit determined by plan
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
the deferred compensation obligation it has to its employees for their service under the terms of the pension plan
pension obligation
the difference between the fair value of the plan assets and the projected benefit obligation
overfunded/ underfunded status
where does the full overfunded/ underfunded status of their defined benefit pension plan get recognized?
on the balance sheet
does "service cost for the year" increase or decrease pension expense?
does "interest on liability" increase or decrease pension expense?
does "actual return on plan assets" increase or decrease pension expense?
generally decreases
does "gain or loss" increase or decrease pension expense?
decreases or increases
does "amortization of prior service cost" increase or decrease pension expense?
generally increases
actual return =
(end plan assets balance - beg plan assets balance)


(contributions - benefits paid)

which columns on a pension worksheet determine the journal entries to be recorded in the formal general ledger?
general journal entries
which columns on a pension worksheet maintain balances for the unrecognized pension items?
memo record
should a company recognize retroactive benefits as pension expense in the year of amendment?
employers should recognize pension expense (PSC) over...
over the remaining service lives of the employees who are expected to benefit from the change in the plan
employers may use this method of amortization ______, but the board prefers the ______ amortization method
straight line amortization

years of service method

unexpected swings in pension expense can result from:
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

techniques for smoothing unexpected G/L on plan assets
- 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

FASB invented the corridor amortization approach for...
amortizing the accumulated net gain or loss balance when it gets too large
how large is too large? (corridor approach)
10% of the larger of the beginning balances of the projected benefit obligation or the market related value of the plan assets
any accumulated OCI G/L balance above _____ must be ______


which parts of pension plans are reported within the financial statements?
- recognition of the net funded status of the plan

- classification of pension A/L

- aggregation of pension plans

- actuarial gains and losses/ PSC

which parts of pension plans are disclosed within the notes to the financial statements?
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