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Defined benefit pension plan terms In a recent year’s financial statements, Procter & Gamble showed an unfunded pension liability of $5,955 million and a periodic pension cost of $432 million. Explain the meaning of the $5,955 million unfunded pension liability and the $432 million periodic pension cost.
Financial & Managerial Accounting
Solutions
Financial & Managerial Accounting
Defined benefit pension plan terms
In a recent year’s financial statements, Procter & Gamble showed an unfunded pension liability of $5,955 million and a periodic pension cost of $432 million.
Explain the meaning of the $5,955 million unfunded pension liability and the $432 million periodic pension cost.
Pension: Pension is a cash payment given to the employees at the time of their retirement. The pension benefits are accrued based on years of service, annual compensation and age, and based on the employer’s pension plan.
Defined benefit pension plan:
- In this plan, the employee is getting a fixed annual amount by the company based on a formula.
- In this plan, the employer is required to pay the fund to the employees after their retirement as a pension benefit.
To explain: The meaning of $5,955 million unfunded pension liability and $432 million periodic pension cost.
Explanation of Solution
Meaning of $5,955 million unfunded pension liability:
The $5,955 million unfunded pension liability is the amount of the pension obligation of Company PG that exceeds the value of the net assets of the pension plan. It is happened when the company contributes less to the plan than the annual pension cost...
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