pensionsandotherpostretirementbenefits

pensionsandotherpostretirementbenefits内容摘要：

on Plan Assets Pension plan assets (like the PBO) are not specifically reported in the balance sheet. A trustee manages the pension plan assets. 1727 Pension Plan Assets Plan assets change as (a) the investments generate dividends, interest, capital gains, etc., (b) additional cash contributions are added by the employer, and (c) payments are made to retired employees. Assume the following balances and changes for Matrix: ($ in millions) P l a n a s s e t s a t t he be gi nni ng of 2 0 0 7 450$ R e t ur n on pl a n a s s e t s ( 1 0 % $ 4 5 0 ) 45 C a s h c ont r i but i ons 160 Le s s : B e ne f i t s pa i d t o r e t i r e e s ( 5 5 ) P l a n a s s e t s a t t he e nd of 2 0 0 7 600$ 1728 Learning Objectives Describe the funded status of pension plans and how that amount is reported. 1729 Funded Status of the Pension Plan OVERFUNDED Market value of plan assets exceeds the actuarial present value of all benefits earned by participants. UNDERFUNDED Market value of plan assets is below the actuarial present value of all benefits earned by participants. 1730 Funded Status of the Pension Plan Projected Benefit Obligation (PBO) Plan Assets at Fair Value Underfunded / Overfunded Status This amount is reported in the balance sheet as a Pension Liability if underfunded or a Pension Asset if overfunded. 1731 Learning Objectives Describe how pension expense is a posite of periodic changes that occur in both the pension obligation and the plan assets. 1732 Pension Expense – An Overview C om pone nt s of P e ns i on E x pe ns e+ S e r v i c e c os t a s c r i be d t o e m pl oy e e s e r v i c e t hi s pe r i od+ I nt e r e s t a c c r ue d on pe ns i on l i a bi l i t y E x pe c t e d r e t ur n on pl a n a s s e t s+ A m or t i z e d por t i on of P r i or S e r v i c e C os t+ or A m or t i z a t i on of N e t Los s or N e t G a i n= P e ns i on e x pe ns e1733 Pension Expense Actuaries have determined that Matrix, Inc. has service cost of $150,000 in 2020 and $155,000 in 2020. We can begin the process of determining pension expense for the pany. 1734 Service Cost 2020 20201 . S e r v i c e C o s t 1 5 0 , 0 0 0$ 1 5 5 , 0 0 0$ T o t a l P e n s i o n E x p e n s e 1 5 0 , 0 0 0$ 1 5 5 , 0 0 0$ 1735 Interest Cost Interest cost is the growth in PBO during a reporting period due to the passage of time. Interest cost is calculated as: PBOBeg Discount rate 1736 Interest Cost Actuaries determined that Matrix, Inc. had PBO of $500,000 on 1/1/07, and $640,000 on 1/1/08. The actuary uses a discount rate of 10%. 1737 2020 20201 . S e r v i c e C o s t 1 5 0 , 0 0 0$ 1 5 5 , 0 0 0$ 2 . I n t e r e s t C o s t 5 0 , 0 0 0 6 4 , 0 0 0 T o t a l P e n s i o n E x p e n s e 2 0 0 , 0 0 0$ 2 1 9 , 0 0 0$ Interest Cost 2020: PBO 1/1/07 $500,000 10% = $50,000 2020: PBO 1/1/08 $640,000 10% = $64,000 1738 Return on Plan Assets Trustee’s estimate of longterm rate of return. Expected Return The dividends, interest, and capital gains generated by the fund during the period. Actual Return 1739 Return on Plan Assets The plan trustee reports that plan assets were $450,000 on 1/1/07, and $600,000 on 1/1/08. The trustee uses an expected return of 9% and the actual return is 10% in both years. 1740 Return on Plan Assets B e gi nn i ng v a l ue of pl a n a s s e t s 4 5 0 , 0 0 0$ R a t e of r e t ur n 10%R e t ur n on pl a n a s s e t s 4 5 , 0 0 0 B e gi nn i ng v a l ue of pl a n a s s e t s 4 5 0 , 0 0 0$ A dj us t m e nt ( 1 0 % 9 % ) 1%A dj us t e d f or ga i n on pl a n a s s e t s 4 , 5 0 0 E x pe c t e d r e t ur n on pl a n a s s e t s 4 0 , 5 0 0$ 2020 B e gi nn i ng v a l ue of pl a n a s s e t s 6 0 0 , 0 0 0$ R a t e of r e t ur n 10%R e t ur n on pl a n a s s e t s 6 0 , 0 0 0 B e gi nn i ng v a l ue of pl a n a s s e t s 6 0 0 , 0 0 0$ A dj us t m e nt ( 1 0 % 9 % ) 1%A dj us t e d f or ga i n on pl a n a s s e t s 6 , 0 0 0 E x pe c t e d r e t ur n on pl a n a s s e t s 5 4 , 0 0 0$ 2020 1741 Return on Plan Assets 2020 20201 . S e r v i c e C o s t 1 5 0 , 0 0 0$ 1 5 5 , 0 0 0$ 2 . I n t e r e s t C o s t 5 0 , 0 0 0 6 4 , 0 0 0 3 . R e t u r n o n P l a n A s s e t s ( 4 0 , 5 0 0 ) ( 5 4 , 0 0 0 ) T o t a l P e n s i o n E x p e n s e 1 5 9 , 5 0 0$ 1 6 5 , 0 0 0$ 1742 Amortization of Prior Service Cost Prior service cost (PSC) results from plan amendments granting increased pension benefits for service rendered before the amendment. PSC is the present value of the retroactive benefits and increases PBO by that amount. 1743 Amortization of Prior Service Cost Benefits attributable to prior service are assumed to benefit future periods by: Improving employee productivity. Improving employee morale. Reducing turnover. Reducing demands for pay raises. 1744 Amortization of Prior Service Cost PSC is amortized over the remaining service period of those employees active at the date of the amendment who are expected to receive benefits under the plan. 1745 Amortization of Prior Service Cost Two approaches to amortizing PSC: Straightline method Amortize PSC over the average remaining。