Pension Plans and Operating Segments

1091 Words Nov 18th, 2012 5 Pages
Pension Plans and Operating Segments

Pension Plans and Operating Segments
Memorandum
To: CEO
From: Controller
Re: Pension plans and operating segments for newly acquired company The intent of this memo is to answer questions regarding the pension plans and operating segments of the company we recently acquired with 100% ownership. This company has two operating segments, each with its own pension plan. Reporting requirements for these issues are explained below.
Pension Plan Reporting Pension plans include defined contribution plans, defined benefit plans, and other postretirement benefits (OPRBs). Each of these plans has separate reporting requirements.
Defined Contribution Plans A defined contribution
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al., 2011). EPBO is calculated as the actuarial present value of the total benefits expected to be paid to the employee after full eligibility. In accordance with FASB ASC 715, disclosure of OPRBs in the financial statements includes plan details regarding policies, assets, costs, reconciliation of funded status, assumptions regarding health care cost trends used to calculate EPBO, and the effects of a one-percentage-point increase in the assumed healthcare trend rates (Schroeder, et. al., 2011).

Operating Segments The most effective way to eliminate the two operating segments from the newly acquired company is to aggregate them with our existing operating segments. There are specific prerequisites for aggregation, as specified in FASB ASC 280-10-50-11. Segments may be aggregated if they have similar economic characteristics and if they are similar in all of the following areas:
a. The nature of the products and services
b. The nature of the production processes
c. The type or class of customer for their products and services
d. The methods used to distribute their products or provide their services
e. If applicable, the nature of the regulatory environment, for example, banking, insurance, or public utilities (Financial Accounting Foundation, 2012).
Assuming the two new segments meet these criteria, our company can eliminate them through aggregation with current operations. In the event the two new segments do not meet criteria for
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