Companies often provide their employees with postemployment benefits other than pensions. These benefits may include health insurance, life insurance, and disability benefits.RequiredExplain how the accounting for these other postemployment benefits is similar or dissimilar to accounting for pensions.View Solution: Companies often provide their employees with postemployment bene

Companies often provide their employees with postemployment benefits other than pensions. These benefits may include health insurance, life insurance, and disability benefits.RequiredExplain how the accounting for these other postemployment benefits is similar or dissimilar to accounting for pensions.View Solution: Companies often provide their employees with postemployment bene

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter12: Liabilities: Off-balance-sheet Financing, Retirement Benefits, And Income Taxes

Section: Chapter Questions

Problem 7Q

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The Employee Retirement Income Security Act (ERISA) requires that companies fund defined-benefit plans, but no such requirement exists for other postretirement benefits such as health insurance. Considering the characteristics of retirement benefits as compared to the characteristics of other postretirement benefits, what impact does this have on a company's financial statements?
In a defined contribution plan, a formula is used that: Ensures that pension expense and the cash funding will be different Requires an employer to contribute a certain sum each period based on the formula Defines the benefits that the employee will receive at the time of retirement Ensures that the employer is at risk to make sure funds are available at retirement
Which of the following is not a characteristic of a defined-contribution pension plan? The employer's contribution each period is fixed. If the employer does not make contribution in full, then it reports a pension liability. If the employer contributes more than the required amount, then it reports a pension asset. An appropriate funding pattern must be established to ensure that the promised benefits at employees’ retirement will be met. The benefit of gain or the risk of loss from the assets contributed to the pension fund are borne by the employee.
What is meant by past service cost? When is past service cost recognized as pension expense? Differentiate between a defined contribution pension plan and defined benefit pension plan. Explain how the employer’s obligation differs between the two types of plans. What disclosures should be made by lessees and lessors related to future payments?
The Employee Retirement Income Security Act (ERISA) requires that companies fund defined-benefit plans, but no such requirement exists for other postretirement benefits such as health insurance. Evaluate whether there should be a requirement that other postretirement benefits be funded.
A company currently offers it’s employees a defined benefit pension plan, but is looking into changing to a defined contribution plan for new employees, the company reports under IFRS. Within the notes, there is reference to the following: in relation to the pension extract (a)• Net pension liabilities/asset • Employee service cost • Net interest expense/income• Remeasurements Explain what the main features are of a defined benefit and defined contribution pension plan and how they are included in the financial statements. With reference to the pension notes, describe each item and how any movement in those items would be recorded in the financial statements.
In a defined-benefit plan, a formula is used that Select one: a. requires that the benefit of gain or the risk of loss from the assets contributed to the pension plan be borne by the employee. b. requires that pension expense and the cash funding amount be the same. c. defines the contribution the employer is to make; no promise is made concerning the ultimate benefits to be paid out to the employees. d. defines the benefits that the employee will receive at the time of retirement.
Which of the following statements is true regarding postretirement health care benefit obligations and their accounting? a. The estimates involved in accounting for such benefits are generally less complex than those associated with accounting for pensions. b. Such benefits are usually provided as part of a defined contribution postretirement benefits plan. c. Employers usually offer multiple varying tiers of coverage based on beneficiaries’ length of service with the company. d. The gross cost of providing such coverage is commonly offset by government-provided health insurance.
Explain the concept of accounting for pensions and other post-employment benefits and the methods used to calculate and record pension expenses.
In our discussions on pensions, we learned about two different types of pension plans – Defined Contribution Plans and Defined Benefit Plans. Explain the differences between these plans. In your discussion, identify the impact each has on the company and the employee.
Carson Company sponsors a single-employer defined benefit pension plan. The plan provides that pension benefits are determined by age, years of service, and compensation. Among the components that should be included in the calculation, net pension cost is service cost, the interest cost, and actual return on plan assets. What two accounting problems result from the nature of the defined benefit pension plan? Why do these problems arise?
Carson Company sponsors a single-employer defined benefit pension plan. The plan provides that pension benefits are determined by age, years of service, and compensation. Among the components that should be included in the calculation net pension cost are service cost, interest cost, and actual return on plan assets. Required: A. What two accounting problems result from the nature of the defined benefit pension plan? Why do those problems arise? B. How should Carson determine service cost component of the net pension cost? C. How should Carson determine the interest cost component of the net pension cost? D. How should Carson determine the actual return on plan assets component of the net pension cost?