Companies generally design pension plans that are
qualified
In a defined-contribution plan, a formula is used that
requires an employer to contribute a certain sum each period based on the formula.
The accumulated benefit obligation measures
the pension obligation on the basis of the plan formula applied to years of service to date and based on existing salary levels.
The interest on the projected benefit obligation component of pension expense
reflects the rates at which pension benefits could be effectively settled.
Prior service cost is amortized on a
years-of-service method or on a straight-line basis over the average remaining service life of active employees.
The fair value of pension plan assets is used to determine the corridor and to calculate the expected return on plan assets.T/F
TRUE
An intangible asset (deferred pension cost) is created when
the accumulated benefit obligation exceeds the fair value of pension plan assets, but accrued pension cost is less than this excess, and unrecognized prior service cost exists.
The main purpose of the Pension Benefit Guaranty Corporation is to
administer terminated plans and to impose liens on the employer's assets for certain unfunded pension liabilities.
When the employer bears the entire cost of a pension plan's costs, the plan is called a
noncontributory plan.
In a defined-benefit plan, the process of funding refers to
making the periodic contributions to a funding agency to ensure that funds are available to meet retirees' claims.
Roundhouse Co. maintains a defined-benefit pension plan for its employees. At each balance sheet date, Roundhouse should report a pension asset / liability equal to the
funded status relative to the projected benefit obligation.
The balance of the Prepaid/Accrued Cost column in the pension worksheet should equal the
net balance in the memo record.
Whenever a defined-benefit plan is amended and credit is given to employees for years of service provided before the date of amendment
both the pension expense and the projected benefit obligation are usually greater than before.
The unexpected gains or losses that result from changes in the projected benefit obligation are called asset gains and losses t/f
FALSE
When is the balance of the Unrecognized Net Gain or Loss account subject to amortization?
When it exceeds 10% of the larger of the beginning balances of the projected benefit obligation or the market-related value of the plan assets.
Which of the following disclosures of pension plan information would not normally be required?
The amount of prior service cost changed or credited in previous years.
Which of the following disclosures of pension plan information would not normally be required by Statement of Financial Accounting Standards No. 132, "Employers' Disclosure about Pensions and Other Postretirement Benefits"?
The amount paid from the pension fund to retirees during the period
In a defined benefit plan, the funding level depends on all of the following factors:
compensation levels, interest earnings, turnover
Which of the following does the FASB argue indicates a more realistic measure of the employer's obligation under the pension plan on a going-concern basis and should be used as the basis for determining service cost?
Projected benefit obligation
Which of the following results from unexpected decreases in the pension obligation?
Liability gains.
The FASB prefers that unrecognized prior service cost be amortized using the:
years of service method
The unrecognized net gain or loss balance must be amortized when it exceeds 10% of the larger of the:
beginning projected benefit obligation or the market-related asset value.
Which of the following losses should be recognized immediately?
Losses that arise from a single occurrence such as a plant closing.
The minimum liability is the difference between the
accumulated benefit obligation and the fair value of plan assets.
When the additional liability exceeds the unrecognized prior service cost:
the excess is debited to a contra equity account.
All of the following pension information should be disclosed in the notes to the financial statements
1.the expected benefit payments to be paid to current plan participants for each of the next five fiscal years.
2. a company's best estimate of expected contributions to be paid to the plan during the next year.
3. a reconciliation showing how the project
All of the following statements regarding the accounting for various forms of compensation plans under IFRS are true
1. IFRS does not recognize prior service costs on the balance sheet.
2. in order to dampen and in some cases fully eliminate the fluctuations in pension expenses, IFRS uses smoothing provisions.
3. for defined benefit plans, IFRS companies have the choice
Post-retirement benefits may include all of the following
Tuition Assistance, dental care, legal and tax services
In a defined benefit plan, pension expense is equal to the firm's cash contribution. T/F
FALSE A firm's contribution payment to the pension plan can be more or less than the actual amount of the pension expense.
If the actual return on plan assets is positive, then it is subtracted from the annual pension expense. T/F
TRUE
Prior service costs due to a pension plan amendment are expensed in the year the amendment occurred. T/F
FALSE. The cost of any retroactive benefits (prior service cost) is recognized in other comprehensive income and amortized over future periods using the years-of-service method.
Pension plan assets are not recognized in the company's accounts or its financial statements. T/F
TRUE
The corridor approach is used to prevent the balance of the OCI - Gain/Loss account balance from getting too large. T/F
TRUE
Companies must record an expense when employees earn future benefits, and recognize an existing obligation to pay pensions later based on current services received. T/F
TRUE
Service cost is the expense caused by the increase in pension benefits payable to employees because of their services rendered during years prior to the current year. T/F
FALSE Service cost is the expense caused by the increase in pension benefits payable to employees because of their services rendered during the current year.
Amortization of prior service cost generally decreases pension expense. T/F
FALSE . Amortization of prior service cost generally increases pension expense.
The expected postretirement benefit obligation is the actuarial present value of future benefits attributed to employees' services rendered to a particular date. T/F
FALSE The expected postretirement benefit obligation is the actuarial present value as of a particular date of all benefits a company expects to pay after retirement to employees and their dependents
Employers are at risk with defined-contribution plans because they must contribute enough to meet the cost of benefits that the plan defines. T/F
FALSE A defined-benefit plan specifies benefits in terms of uncertain future variables, so a company is at risk and must establish an appropriate funding pattern to ensure the availability of funds at retirement in order to provide the benefits promised
Unlike IFRS, U.S. GAAP does not permit the choice of recognizing actuarial gains and losses in income immediately or amortizing them over the expected remaining work lives of employees. T/F
TRUE
In a defined benefit plan, the contributions to the plan are made by the:
EMPLOYER
The approach adopted by the accounting profession to measure a firm's pension obligation is the:
PBO
Which of the following may decrease the annual pension expense amount?
Actual return on plan assets
Amortization of prior service costs is based on the
Years of service method
Which of the following is formally recognized in the accounts of a company?
Pension Asset/Liability
Which of the following disclosures is not required of companies with a defined-benefit pension plan?
a. A description of the plan.
b. The amount of pension expense by component.
c. The weighted average discount rate.
d. The estimates of future contributio
D
The following information pertains to Gali Co.'s defined benefit pension plan for 1994:
Fair value of plan assets, beginning of year $350,000
Fair value of plan assets, end of year 525,000
Employer contributions 110,000
Benefits paid 85,000
In computing p
B
An employer's obligation for postretirement health benefits that are expected to be provided to or for an
employee must be fully accrued by the date the:
a. Employee is fully eligible for benefits.
b. Employee retires.
c. Benefits are utilized.
d. Benefit
a
An employer's obligation for postretirement health benefits that are expected to be provided to or for an
employee must be fully accrued by the date the:
a. Employee is fully eligible for benefits.
b. Employee retires.
c. Benefits are utilized.
d. Benefit
c
What is the present value of all future retirement payments attributed by the pension benefit formula to
employee services rendered prior to that date and based on past and current compensation levels only?
a. Service cost.
b. Interest cost.
c. Projected
d
At December 31, 20X8, High Horse Company has the following pension plan information:
Fair value of plan assets, beginning of year $1,100,000; Fair value of plan assets, ending of year 1,135,000; Contributions 275,000; Benefits paid 340,000; Expected rate
b