Answered: Depending on when an unfunded pension…

Depending on when an unfunded pension liability is to be paid, it will be classified on the balance sheet as either a long-term or a current liability.

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter16: Advanced Topics Concerning Complex Auditing Judgments

Section: Chapter Questions

Problem 41RSCQ

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Concept explainers

Employee Benefits

In an organization employees are the most important resource and most important asset. They can lead an organization to the sky or can be the reason for unsuccessful of business. Therefore, it is very much important that employees of an organization should be satisfied by the environment of the organization and most importantly with the salary, wages incentives, etc.

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Depending on when an unfunded pension liability is to be paid, it will be classified on the balance sheet as either a long-term or a current liability.

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Any past service costs should be included in the a) pension expense of past periods. b) pension expense of the current period. c) pension expense of current and future periods. d) plan assets.
The return on plan assets is the increase in plan assets (at fair value), adjusted for contributions to the plan and benefits paid during the period. How is the return included in the calculation of the periodic pension expense?
b. How does each component of pension expense affect pension expense during the period (increase, decrease, or uncertain)? c. What is the difference between the accumulated pension obligation and the projected pension obligation? d. What determines whether a pension plan is underfunded or overfunded?
What method should be used to account for profits or losses associated with pension plan assets? What is the relationship between this treatment and the handling of profits or losses connected to the pension obligation?
In computing the interest component of pension expense, what interest rates may be used?
How should gains or losses related to pension plan assets be recognized? How does this treatment compare to that for gains or losses related to the pension obligation?
Describe the Components of Pension Expense.
Which are the components that are included in the pension expense?
How is the pension expense influenced by changes in the pension liability and plan assets?
what is the difference between Accumulated Benefit Obligation and Projected Benefit Obligation? How do you determine the Plan Asset/Liability? How do you compute the Pension Expense?
Net interest cost is a component of pension expense under IFRS. How is net interest cost calculated? Select one: O a. The increase in the DBO over the period, net of the increase in the plan assets over the period. O b. Interest expense on the DBO, net of actual interest income earned on plan assets. O c. Interest expense on the defined benefit obligation (DBO), net of expected interest income earned on plan assets. O d. The increase in the DBO over the period, net of the increase in the plan assets over the period.
look over the three most important components of the pension expense. The treatment of expected and actual return on plan assets, particularly when the actual return is greater than the expected, the amortization of prior service cost and the unexpected gain/ loss. Discuss the accounting treatment of these items with suitable examples.