27th Edition
WARREN + 5 others
ISBN: 9781337272094




27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Defined benefit pension plan terms

In a recent year’s financial statement, Procter & Gamble showed an unfunded pension liability of $5,599 million and a periodic pension cost of $434 million.

Explain the meaning of the $5,599 million unfunded pension liability and the $434 million periodic pension cost.

To determine

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.


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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