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| When a defined benefit pension fund has assets whose value is below the present value of its expected future obligations, the plan is | ||||||||
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- 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.For a defined benefit pension plan, pension expense consists of five components, for which the formula is Service Cost – Interest Cost + Expected Return on Plan Assets – Amortization of Prior Service Cost +(–) Gain (Loss). Service Cost + Interest Cost – Expected Return on Plan Assets + Amortization of Prior Service Cost +(–) Gain (Loss). Service Cost + Interest Cost + Expected Return on Plan Assets – Amortization of Prior Service Cost +(–) Gain (Loss). Service Cost – Interest Cost + Expected Return on Plan Assets + Amortization of Prior Service Cost +(–) Gain (Loss).What are the four basic components of pension expense? Select one: A. Service cost, benefits paid, expected return on plan assets, and amortization of deferred amounts B. Service cost, benefits paid, actual return on plan assets, and amortization of deferred amounts C. Service cost, interest cost, actual return on plan assets, and amortization of deferred amounts D. Service cost,interest cost, expected return on plan assets, and amortization of deferred amounts E. None of the above
- 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.Which of the following statements regarding asset ceilings for overfunded and underfunded pension plans is true? A. For underfunded pension plans, the issue is whether the sponsoring entity can realize the benefits of the underfunding either through reducing or stopping its contributions in the future or through withdrawing surplus funds. B. An overfunded pension results in a net defined benefit liability on the SFP. C. An underfunded pension has a fair value of plan assets that is less than the DBO. D. An asset ceiling is the minimum benefit that the employer can realize by reducing or stopping future contributions to a defined benefit pension plan.Under IFRS, which of the following statements is true regarding accounting for defined benefit pension plan settlements? Select one: a. Settlements increase the defined benefit obligation (DBO). b. Any gain or loss on a plan settlement is presented as part of other comprehensive income c. The difference between the change in the DBO and the change in the plan assets as a result of the plan settlement is recognized as a gain or loss. d. Settlements increase the plan assets
- Which of the following types of pension plan will provide benefits that are dependent on the return on the investment of contributions? Defined benefit plan. Defined contribution plan. Undefined benefit plan. All of these choices.Detail the possible causes of a deficit in a Defined Benefit (DB) pension plan and explain why a Defined Contribution (DC) pension plan cannot have a deficit.S1: Under a defined contribution plan, the amount of a participant’s future benefits is determined by the contributions paid by the employer, the participant, or both, and the operating efficiency and investment earnings of the fund. S2: Under a defined benefit plan, the payment of promised retirement benefits depends on the financial position of the plan and the ability of contributors to make future contributions to the plan as well as the investment performance and operating efficiency of the plan. Only S1 is true None is true Only S2 is true Both are true
- Question Content Area ERISA (Pension Reform Act of 1974) provides guidance for actual return on plan assets minimum funding during the year accumulated benefit obligation projected benefit obligationsexplain why a Defined Contribution (DC) pension plan cannot have a deficit.In a defined benefit plan, the retirement benefit will vary according to rates of return on pension fund reserves. True False
