66 A company has a defined benefit pension plan for its employees. Discuss theaccounting treatment for defined benefit plans and the potential impact on thecompany's financial statements. What are the risks associated with definedbenefit plans? How can the company manage these risks?

In summary:Defined benefit plans require specific accounting treatments under standards like IAS 19…

Answered: A company has a defined benefit pension…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter19: Accounting For Post Retirement Benefits

Section: Chapter Questions

Problem 18GI

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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?
Discuss the role that pension funds play in company pension plans. What benefits accrue to companies who elect to use pension funds? How does the use of a pension fund change the accounting that must be done with respect to employee pension amounts?
What benefits accrue to companies who elect to use pension funds? How does the use of a pension fund change the accounting that must be done with respect to employee pension amounts?
Describe what factors contribute to the pension benefit obligation. Discuss the effect of the increase or decrease on the PBO. How is this change reported in the financial statements and what other accounts are affected? Provide an example from a publicly-traded company.
4. . A. What are the main differences in the management of a defined benefit pension plan, compared with the management of a defined contribution pension plan? B. How does the current age of a current worker (not a current retiree) impact the cost to the employer (sponsor) of a defined benefit pension plan? Explain fully. C. Some employers offer defined benefit pension plans, while others offer defined contribution pension plans. Separately explain how risk management, both by employer as well as by employer, plays a role in which type of plan the employer decides to offer. D. Now changing subject, so the question will not be too short. Identify and explain all three separate components of a rate of interest (or of any other required rate of return). Draw and explain the utility function, from the beginning of the semester, if necessary to find any of the three components. Е. Apply all three of the components of a rate of interest, from part D, to explain how an insurance company…
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For Pension Plans: A. Describe the differences between a Defined Benefit pension plan and a Defined Contribution pension plan. B. What are the advantages and disadvantages of each compared to the other?
What is a pension plan? What motivates a corporation to offer a pension plan for its employees?
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.
Which of the following statements are disadvantages for the employer-sponsor of a cash balance pension plan? 1)A certain level of plan benefit is guaranteed by the PBGC. 2)The employer bears the investment risk in the plan. 3)Cash balance pension plans are less expensive for the employer than a traditional defined benefit pension plan. 4)Retirement benefits may be inadequate for older plan entrants Answer list below a) 2, 4 b) 1, 2 c) 1, 3 d) 3, 4

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A company has a defined benefit pension plan for its employees. Discuss the accounting treatment for defined benefit plans and the potential impact on the company's financial statements. What are the risks associated with defined benefit plans? How can the company manage these risks?