This document discusses accounting for pensions and postretirement benefits. It covers:
1) Defined benefit and defined contribution pension plans, and how a company determines annual costs for each.
2) How a company determines the annual cost of a defined benefit pension plan using a three step process involving actuaries to calculate future benefits, present value, and period to spread costs.
3) Factors that impact pension expenses such as changes in discount rates, expected returns on assets, compensation growth rates, additional benefits granted, and changes to life expectancies or employee turnover assumptions.
This document discusses key points about leases, including the differences between capital and operating leases. Capital leases transfer substantially all risks and benefits of ownership to the lessee, who accounts for it as an asset and liability. Operating leases are treated as rental expenses. The document provides an example to illustrate how to determine the interest and principal portions of a capital lease payment and compares the income statement and balance sheet effects of operating versus capital leases. It also discusses lease disclosure requirements and off-balance sheet financing using operating leases.
This document provides an overview of analyzing a company's financing activities. It discusses the major sources of corporate financing which include liabilities, capital/stockholders' equity, and off-balance sheet transactions. For liabilities, it describes the two major types and how they are classified. For capital/stockholders' equity, it outlines the basic elements including preferred stock, common stock, paid-in capital, retained earnings, and treasury stock. It also discusses off-balance sheet financing methods and the motivations for using them. Commitments and contingencies are distinguished, and lease accounting is briefly covered.
The document discusses various topics related to analyzing investing activities including investment securities, business combinations, and derivative securities. It provides definitions and accounting treatments for different types of investment securities, the equity method of accounting for intercorporate investments, and the purchase method of accounting for business combinations. It also defines various types of derivative securities and discusses disclosure requirements related to derivatives and the fair value option for reporting financial assets and liabilities.
1. The document discusses prospective financial analysis, which involves forecasting future financial statements to value securities, assess management plans, and evaluate solvency.
2. It provides steps for projecting an income statement and balance sheet, including forecasting revenue, expenses, assets, liabilities, and equity accounts based on historical trends and ratios.
3. The document includes a sample projected income statement and balance sheet for Target Corporation for 2006 using the outlined forecasting steps and 2005 actual financial statements.
This document discusses liquidity and working capital analysis. It defines key terms like liquidity, current assets, current liabilities, and working capital. It then discusses various liquidity ratios used to analyze companies, including the current ratio, quick ratio, and cash ratio. It also discusses analyzing operating activities through accounts receivable and inventory turnover ratios. Additional liquidity measures like financial flexibility and cash flow analysis are covered. The document concludes by discussing analyzing a company's capital structure, earnings coverage, and overall solvency.
This document provides an overview of various topics related to analyzing financial statements, including:
- Classification of assets as current/short-term versus noncurrent/long-term.
- Specific current assets like cash, accounts receivable, inventory, and prepaid expenses. Methods for valuing these assets are discussed.
- Long-lived or long-term assets including tangible assets like property, plant, and equipment as well as intangible assets. The capitalization, allocation, and impairment of these assets is covered.
- Specific sections cover topics like accounting for cash, analyzing receivables, inventory costing methods, plant asset costing and valuation, and depreciation of plant assets.
This document discusses concepts related to analyzing a company's operating activities through its financial statements. It covers topics such as economic versus permanent income, revenue and expense recognition criteria, non-recurring items, deferred charges, employee stock options, interest costs, and income taxes. The key concepts are that economic income includes both recurring and non-recurring components, while permanent income reflects a company's stable average earnings power. It also discusses adjusting the income statement and balance sheet for non-recurring items to better assess a company's core operating performance.
This document discusses key points about leases, including the differences between capital and operating leases. Capital leases transfer substantially all risks and benefits of ownership to the lessee, who accounts for it as an asset and liability. Operating leases are treated as rental expenses. The document provides an example to illustrate how to determine the interest and principal portions of a capital lease payment and compares the income statement and balance sheet effects of operating versus capital leases. It also discusses lease disclosure requirements and off-balance sheet financing using operating leases.
This document provides an overview of analyzing a company's financing activities. It discusses the major sources of corporate financing which include liabilities, capital/stockholders' equity, and off-balance sheet transactions. For liabilities, it describes the two major types and how they are classified. For capital/stockholders' equity, it outlines the basic elements including preferred stock, common stock, paid-in capital, retained earnings, and treasury stock. It also discusses off-balance sheet financing methods and the motivations for using them. Commitments and contingencies are distinguished, and lease accounting is briefly covered.
The document discusses various topics related to analyzing investing activities including investment securities, business combinations, and derivative securities. It provides definitions and accounting treatments for different types of investment securities, the equity method of accounting for intercorporate investments, and the purchase method of accounting for business combinations. It also defines various types of derivative securities and discusses disclosure requirements related to derivatives and the fair value option for reporting financial assets and liabilities.
1. The document discusses prospective financial analysis, which involves forecasting future financial statements to value securities, assess management plans, and evaluate solvency.
2. It provides steps for projecting an income statement and balance sheet, including forecasting revenue, expenses, assets, liabilities, and equity accounts based on historical trends and ratios.
3. The document includes a sample projected income statement and balance sheet for Target Corporation for 2006 using the outlined forecasting steps and 2005 actual financial statements.
This document discusses liquidity and working capital analysis. It defines key terms like liquidity, current assets, current liabilities, and working capital. It then discusses various liquidity ratios used to analyze companies, including the current ratio, quick ratio, and cash ratio. It also discusses analyzing operating activities through accounts receivable and inventory turnover ratios. Additional liquidity measures like financial flexibility and cash flow analysis are covered. The document concludes by discussing analyzing a company's capital structure, earnings coverage, and overall solvency.
This document provides an overview of various topics related to analyzing financial statements, including:
- Classification of assets as current/short-term versus noncurrent/long-term.
- Specific current assets like cash, accounts receivable, inventory, and prepaid expenses. Methods for valuing these assets are discussed.
- Long-lived or long-term assets including tangible assets like property, plant, and equipment as well as intangible assets. The capitalization, allocation, and impairment of these assets is covered.
- Specific sections cover topics like accounting for cash, analyzing receivables, inventory costing methods, plant asset costing and valuation, and depreciation of plant assets.
This document discusses concepts related to analyzing a company's operating activities through its financial statements. It covers topics such as economic versus permanent income, revenue and expense recognition criteria, non-recurring items, deferred charges, employee stock options, interest costs, and income taxes. The key concepts are that economic income includes both recurring and non-recurring components, while permanent income reflects a company's stable average earnings power. It also discusses adjusting the income statement and balance sheet for non-recurring items to better assess a company's core operating performance.
Advansed Accounting Ch 1: The Equity Method of Accounting for InvestmentsAbdulkadir Molla
This document discusses the equity method of accounting for investments. It covers several key points:
1. The equity method is used when an investor has significant influence over an investee, usually through owning 20-50% of the investee's voting stock.
2. Under the equity method, the investment is initially recorded at cost. The carrying amount is then increased or decreased to recognize the investor's share of the investee's earnings or losses after acquisition.
3. Journal entries are made to increase the investment for the investor's share of earnings, and decrease it for dividends received from the investee. This matches the investor's income recognition with that of the investee.
4. There may
This document provides an overview of financial statement analysis. It discusses evaluating business prospects and risks through credit analysis, equity analysis, accounting analysis, and financial analysis. These analyses examine a company's liquidity, solvency, profitability, and cash flows. Ratio analysis and valuation methods are also covered. The purpose is to evaluate a company's performance and financial position over time using its financial statements and additional information.
This document discusses the statement of cash flows and cash flow analysis. It begins by explaining the relevance of cash flows and the statement of cash flows. The statement of cash flows reports cash receipts and payments categorized by operating, investing, and financing activities. It can be constructed using either the direct or indirect method. The indirect method adjusts net income for non-cash items to determine cash flows from operations. Cash flow analysis helps assess a company's liquidity, solvency, and financial flexibility. Ratios like the cash flow adequacy ratio and cash reinvestment ratio can provide additional insights.
IAS 8 outlines the accounting for investments in associates. It defines an associate as an entity over which an investor has significant influence, but is neither a subsidiary nor joint venture. Significant influence is presumed with a 20% or more voting interest. The equity method is used to account for associates in consolidated financial statements, adjusting the carrying amount for the investor's share of post-acquisition profits or losses. Separate financial statements may account for associates at cost or in accordance with IAS 39.
The document discusses key concepts related to financial reporting including:
1) Financial reporting provides formal records of a company's financial activities primarily for external users like shareholders and internal users like management. Annual reports contain key documents like directors reports and financial statements.
2) There are various forms of business organization but joint stock companies have features like limited liability, transferable shares, and elected management through directors.
3) The objective of financial reporting is to provide useful information to investors and creditors to make decisions about providing resources to an entity. Reports are limited and users need other sources of information as well.
This document summarizes key points from Chapter 11 on equity analysis and valuation. It discusses recasting financial statements to separate recurring from non-recurring earnings components. Earnings persistence, determinants of persistence, and their relevance for forecasting are analyzed. Earnings-based valuation is described, emphasizing the use of earnings and accounting measures to compute company value. The importance of analyzing earning power and forecasting earnings for valuation purposes is also explained. Several tools for equity analysis and techniques for recasting, adjusting, and forecasting earnings are outlined.
This document provides an analysis of financial statements including the balance sheet, trial balance, and differences between them. It discusses how a balance sheet is organized according to order of permanence or liquidity with assets on one side and liabilities/capital on the other. The trial balance contains debit and credit balances of all accounts to test accuracy, while the balance sheet incorporates only asset and liability balances to ascertain financial position on a given date. It also outlines the differences between a profit and loss account, which shows revenues/expenses over time, and a balance sheet, which presents assets, liabilities and capital at a point in time.
- IAS 33 provides guidance on calculating and presenting earnings per share (EPS) and related disclosures. It covers entities with publicly traded ordinary shares or potential ordinary shares.
- EPS is calculated as basic EPS and diluted EPS. Basic EPS uses existing shares, while diluted EPS shows what EPS would be if all potential ordinary shares were issued. Both require adjusting earnings and shares for various factors.
- The standard outlines specific calculation methods and requires disclosure of EPS amounts and reconciliations in the financial statements.
The document provides an overview of financial statements, including balance sheets, cash flow statements, and notes. It explains that a balance sheet summarizes a company's financial position at a point in time by listing assets, liabilities, and shareholder equity. It also describes the major components of each type of financial statement and provides sample notes to the financial statements that give additional context and details. The cash flow statement tracks cash inflows and outflows from operating, investing, and financing activities over a period of time. Understanding these statements is important for assessing a company's financial strength and cash flows.
Earnings per share is a ratio used to analyze financial statements that measures a company's profit allocated to each outstanding share of common stock. International Accounting Standard 33 was developed to standardize how earnings per share is calculated, which involves dividing earnings attributable to ordinary shareholders by the weighted average number of ordinary shares. There are two types of earnings per share calculations: basic EPS uses actual ordinary shares outstanding, while diluted EPS considers additional potential ordinary shares, such as from convertible bonds, that would lower per-share earnings if converted.
The document discusses key financial statements that provide information about a company's financial performance and position. It describes the income statement as showing revenues, expenses and profits over a period of time. The balance sheet provides a snapshot of assets, liabilities and shareholders' equity as of a point in time. The cash flow statement reports cash inflows and outflows during a period. Understanding these statements allows analysis of a company's current and future financial condition.
This chapter discusses how businesses finance their operations through debt or equity financing. It describes key liabilities like current liabilities, notes payable, taxes, and contingencies. It also explains how businesses issue bonds and stock to raise capital. The chapter covers accounting for dividends, stock splits, and their impact on financial statements. It analyzes how debt versus equity financing affects earnings per share.
Finance for Non Financial Managers 6th Edition Bergeron Test BankSandraBentonss
fULL DOWNLOAD : https://alibabadownload.com/product/finance-for-non-financial-managers-6th-edition-bergeron-test-bank/ Finance for Non Financial Managers 6th Edition Bergeron Test Bank , Finance for Non Financial Managers,Bergeron,6th Edition,Test Bank
The document discusses balance sheet analysis. It defines a balance sheet as a financial statement that presents the assets and liabilities of a company or individual. There are three main methods of balance sheet analysis: vertical analysis, which analyzes a single period statement; horizontal analysis, which compares data sets over two or more periods; and ratio analysis, which uses ratios to compare financial metrics to benchmarks. Common ratios examined in balance sheet analysis include liquidity, capital structure, profitability, and activity ratios.
Summary of Ind AS 28 for the students and who are new to Ind AS. They can make a basic understanding about the words, definition, terms, provisions used in the actual Ind AS 28.
The document discusses financial management and management accounting. It defines financial management as measuring and reporting financial and non-financial information to help managers make decisions to fulfill organizational goals. Management accounting also measures and reports this information, but focuses on internal reporting to help managers make decisions. The document outlines the objectives, functions, key themes, and differences between financial and management accounting. It provides examples of a fund flow statement and cash flow statement, explaining their purposes and how they are computed.
Chapter 2: Consolidation of Financial Information Abdulkadir Molla
1. The chapter discusses the consolidation process for business combinations, where one company obtains control over another and their financial statements are combined.
2. There are two main methods for consolidation - acquisition method for when dissolution occurs, and acquisition method for when separate incorporation is maintained.
3. For both methods, consideration transferred is allocated to identifiable assets acquired and liabilities assumed at fair value, with any excess added to goodwill. Acquisition costs are expensed rather than included in the purchase price.
SAP BPC 10 Training Videos for Instructor led Online training
For More Info: Please visit, http://www.zarantech.com/course-list/sap/bpc-business-planning-and-consolidation
Contact Info: 515-309-7846 (or) Email - info@zarantech.com
BPC 10 Training Features:
- SAP NW BOPC 10 - Planning, Budgeting, Consolidation in detail with Real-time Business Scenario Test Data.
- Both Technical and Functional aspects will be covered
- BPC powered by SAP HANA
- Details of BPC in backend prospective with SAP BW 7.3
- Integration of SAP BO BI 4.0 Reporting Tools wil BPC 10
- Designing the DashBoard Reports using DASHBOARD DESIGN 4.0
- Uploading Master & Transactional Data from various Source systems in Detail (BW Info objects, info cubes, Flat Files etc)
- On Full End-to-End Budgeting Scenario, Planning Scenario, and Legal Consolidation Scenario (with Business Rules)
- Intra Company eliminations and Currency conversions
Refer your friends to ZaranTech for their Training & consulting needs and Reward yourself with benefits, http://www.zarantech.com/be-a-friend-tell-a-friend
Cannot Attend LIVE sessions !! - Then we have another option for you. It is called Instructor led VIDEO training. See this Video for more info, http://www.youtube.com/watch?v=naPdAyKvAI0
This document provides an overview of finance basics for small businesses, including cost calculation, pricing methods, sales forecasting, and budgeting. It discusses the different types of costs (fixed, variable, direct, indirect), principles of cost accounting, and methods of costing (job, process, activity-based). The document also covers various pricing approaches (cost-plus, target return, value-based, psychological) and factors that influence sales forecasting (internal, external). It emphasizes the importance of designing customer profiles, mapping customers and competitors, and creating detailed financial plans to serve as budgets.
Small business owners have several options for establishing a retirement plan for their employees. The document discusses the need for retirement planning and outlines various plan types including defined benefit pensions, 401(k) plans, SEP-IRAs, and SIMPLE IRAs. It provides details on eligibility requirements, contribution limits, tax benefits and administration considerations for small business retirement plans. UBS Financial Services can help business owners evaluate their options and set up a plan that meets their needs.
This document summarizes retirement planning options for business owners. It discusses how lack of retirement capital can undermine business succession plans. It then outlines qualified retirement plans like defined contribution plans (401k, profit sharing) and defined benefit plans as tax advantaged ways for businesses to fund owner retirement. It describes features and benefits of these plans, how they work, and distribution options to ensure lifetime income. Hybrid plans combining features are also mentioned. The overall message is retirement planning is critical for business continuity and succession.
Advansed Accounting Ch 1: The Equity Method of Accounting for InvestmentsAbdulkadir Molla
This document discusses the equity method of accounting for investments. It covers several key points:
1. The equity method is used when an investor has significant influence over an investee, usually through owning 20-50% of the investee's voting stock.
2. Under the equity method, the investment is initially recorded at cost. The carrying amount is then increased or decreased to recognize the investor's share of the investee's earnings or losses after acquisition.
3. Journal entries are made to increase the investment for the investor's share of earnings, and decrease it for dividends received from the investee. This matches the investor's income recognition with that of the investee.
4. There may
This document provides an overview of financial statement analysis. It discusses evaluating business prospects and risks through credit analysis, equity analysis, accounting analysis, and financial analysis. These analyses examine a company's liquidity, solvency, profitability, and cash flows. Ratio analysis and valuation methods are also covered. The purpose is to evaluate a company's performance and financial position over time using its financial statements and additional information.
This document discusses the statement of cash flows and cash flow analysis. It begins by explaining the relevance of cash flows and the statement of cash flows. The statement of cash flows reports cash receipts and payments categorized by operating, investing, and financing activities. It can be constructed using either the direct or indirect method. The indirect method adjusts net income for non-cash items to determine cash flows from operations. Cash flow analysis helps assess a company's liquidity, solvency, and financial flexibility. Ratios like the cash flow adequacy ratio and cash reinvestment ratio can provide additional insights.
IAS 8 outlines the accounting for investments in associates. It defines an associate as an entity over which an investor has significant influence, but is neither a subsidiary nor joint venture. Significant influence is presumed with a 20% or more voting interest. The equity method is used to account for associates in consolidated financial statements, adjusting the carrying amount for the investor's share of post-acquisition profits or losses. Separate financial statements may account for associates at cost or in accordance with IAS 39.
The document discusses key concepts related to financial reporting including:
1) Financial reporting provides formal records of a company's financial activities primarily for external users like shareholders and internal users like management. Annual reports contain key documents like directors reports and financial statements.
2) There are various forms of business organization but joint stock companies have features like limited liability, transferable shares, and elected management through directors.
3) The objective of financial reporting is to provide useful information to investors and creditors to make decisions about providing resources to an entity. Reports are limited and users need other sources of information as well.
This document summarizes key points from Chapter 11 on equity analysis and valuation. It discusses recasting financial statements to separate recurring from non-recurring earnings components. Earnings persistence, determinants of persistence, and their relevance for forecasting are analyzed. Earnings-based valuation is described, emphasizing the use of earnings and accounting measures to compute company value. The importance of analyzing earning power and forecasting earnings for valuation purposes is also explained. Several tools for equity analysis and techniques for recasting, adjusting, and forecasting earnings are outlined.
This document provides an analysis of financial statements including the balance sheet, trial balance, and differences between them. It discusses how a balance sheet is organized according to order of permanence or liquidity with assets on one side and liabilities/capital on the other. The trial balance contains debit and credit balances of all accounts to test accuracy, while the balance sheet incorporates only asset and liability balances to ascertain financial position on a given date. It also outlines the differences between a profit and loss account, which shows revenues/expenses over time, and a balance sheet, which presents assets, liabilities and capital at a point in time.
- IAS 33 provides guidance on calculating and presenting earnings per share (EPS) and related disclosures. It covers entities with publicly traded ordinary shares or potential ordinary shares.
- EPS is calculated as basic EPS and diluted EPS. Basic EPS uses existing shares, while diluted EPS shows what EPS would be if all potential ordinary shares were issued. Both require adjusting earnings and shares for various factors.
- The standard outlines specific calculation methods and requires disclosure of EPS amounts and reconciliations in the financial statements.
The document provides an overview of financial statements, including balance sheets, cash flow statements, and notes. It explains that a balance sheet summarizes a company's financial position at a point in time by listing assets, liabilities, and shareholder equity. It also describes the major components of each type of financial statement and provides sample notes to the financial statements that give additional context and details. The cash flow statement tracks cash inflows and outflows from operating, investing, and financing activities over a period of time. Understanding these statements is important for assessing a company's financial strength and cash flows.
Earnings per share is a ratio used to analyze financial statements that measures a company's profit allocated to each outstanding share of common stock. International Accounting Standard 33 was developed to standardize how earnings per share is calculated, which involves dividing earnings attributable to ordinary shareholders by the weighted average number of ordinary shares. There are two types of earnings per share calculations: basic EPS uses actual ordinary shares outstanding, while diluted EPS considers additional potential ordinary shares, such as from convertible bonds, that would lower per-share earnings if converted.
The document discusses key financial statements that provide information about a company's financial performance and position. It describes the income statement as showing revenues, expenses and profits over a period of time. The balance sheet provides a snapshot of assets, liabilities and shareholders' equity as of a point in time. The cash flow statement reports cash inflows and outflows during a period. Understanding these statements allows analysis of a company's current and future financial condition.
This chapter discusses how businesses finance their operations through debt or equity financing. It describes key liabilities like current liabilities, notes payable, taxes, and contingencies. It also explains how businesses issue bonds and stock to raise capital. The chapter covers accounting for dividends, stock splits, and their impact on financial statements. It analyzes how debt versus equity financing affects earnings per share.
Finance for Non Financial Managers 6th Edition Bergeron Test BankSandraBentonss
fULL DOWNLOAD : https://alibabadownload.com/product/finance-for-non-financial-managers-6th-edition-bergeron-test-bank/ Finance for Non Financial Managers 6th Edition Bergeron Test Bank , Finance for Non Financial Managers,Bergeron,6th Edition,Test Bank
The document discusses balance sheet analysis. It defines a balance sheet as a financial statement that presents the assets and liabilities of a company or individual. There are three main methods of balance sheet analysis: vertical analysis, which analyzes a single period statement; horizontal analysis, which compares data sets over two or more periods; and ratio analysis, which uses ratios to compare financial metrics to benchmarks. Common ratios examined in balance sheet analysis include liquidity, capital structure, profitability, and activity ratios.
Summary of Ind AS 28 for the students and who are new to Ind AS. They can make a basic understanding about the words, definition, terms, provisions used in the actual Ind AS 28.
The document discusses financial management and management accounting. It defines financial management as measuring and reporting financial and non-financial information to help managers make decisions to fulfill organizational goals. Management accounting also measures and reports this information, but focuses on internal reporting to help managers make decisions. The document outlines the objectives, functions, key themes, and differences between financial and management accounting. It provides examples of a fund flow statement and cash flow statement, explaining their purposes and how they are computed.
Chapter 2: Consolidation of Financial Information Abdulkadir Molla
1. The chapter discusses the consolidation process for business combinations, where one company obtains control over another and their financial statements are combined.
2. There are two main methods for consolidation - acquisition method for when dissolution occurs, and acquisition method for when separate incorporation is maintained.
3. For both methods, consideration transferred is allocated to identifiable assets acquired and liabilities assumed at fair value, with any excess added to goodwill. Acquisition costs are expensed rather than included in the purchase price.
SAP BPC 10 Training Videos for Instructor led Online training
For More Info: Please visit, http://www.zarantech.com/course-list/sap/bpc-business-planning-and-consolidation
Contact Info: 515-309-7846 (or) Email - info@zarantech.com
BPC 10 Training Features:
- SAP NW BOPC 10 - Planning, Budgeting, Consolidation in detail with Real-time Business Scenario Test Data.
- Both Technical and Functional aspects will be covered
- BPC powered by SAP HANA
- Details of BPC in backend prospective with SAP BW 7.3
- Integration of SAP BO BI 4.0 Reporting Tools wil BPC 10
- Designing the DashBoard Reports using DASHBOARD DESIGN 4.0
- Uploading Master & Transactional Data from various Source systems in Detail (BW Info objects, info cubes, Flat Files etc)
- On Full End-to-End Budgeting Scenario, Planning Scenario, and Legal Consolidation Scenario (with Business Rules)
- Intra Company eliminations and Currency conversions
Refer your friends to ZaranTech for their Training & consulting needs and Reward yourself with benefits, http://www.zarantech.com/be-a-friend-tell-a-friend
Cannot Attend LIVE sessions !! - Then we have another option for you. It is called Instructor led VIDEO training. See this Video for more info, http://www.youtube.com/watch?v=naPdAyKvAI0
This document provides an overview of finance basics for small businesses, including cost calculation, pricing methods, sales forecasting, and budgeting. It discusses the different types of costs (fixed, variable, direct, indirect), principles of cost accounting, and methods of costing (job, process, activity-based). The document also covers various pricing approaches (cost-plus, target return, value-based, psychological) and factors that influence sales forecasting (internal, external). It emphasizes the importance of designing customer profiles, mapping customers and competitors, and creating detailed financial plans to serve as budgets.
Small business owners have several options for establishing a retirement plan for their employees. The document discusses the need for retirement planning and outlines various plan types including defined benefit pensions, 401(k) plans, SEP-IRAs, and SIMPLE IRAs. It provides details on eligibility requirements, contribution limits, tax benefits and administration considerations for small business retirement plans. UBS Financial Services can help business owners evaluate their options and set up a plan that meets their needs.
This document summarizes retirement planning options for business owners. It discusses how lack of retirement capital can undermine business succession plans. It then outlines qualified retirement plans like defined contribution plans (401k, profit sharing) and defined benefit plans as tax advantaged ways for businesses to fund owner retirement. It describes features and benefits of these plans, how they work, and distribution options to ensure lifetime income. Hybrid plans combining features are also mentioned. The overall message is retirement planning is critical for business continuity and succession.
The document discusses trends in executive benefits, including trends in cash and incentive compensation, retirement plans, and equity programs. It provides examples of different types of non-qualified deferred compensation plans, cash bonus plans, long-term incentive plans, and retirement plans that employers can offer executives. The summaries highlight advantages and disadvantages for both employers and executives of these various executive benefit plan types.
Dr. Sanchez has multiple retirement plans available to her, including qualified pension plans, profit sharing plans, 401(k) plans, and 403(b) tax-deferred annuity plans. Joyce is interested in learning more about the types of plans Dr. Sanchez could have and how to establish multiple retirement plans. Qualified retirement plans offer tax benefits to both employees and employers, including immediate tax deductions for employer contributions and tax-deferred earnings and growth until funds are withdrawn after retirement. Contribution limits vary by plan type but are designed to maximize long-term retirement savings over a career.
This document discusses defined benefit pension plans. It provides definitions and explanations of key terms related to DB plans, including funded status, accumulated benefit obligation, projected benefit obligation, plan surplus, total future liability, retired lives, and active lives. It also discusses factors that influence a DB plan's investment objectives and strategies, such as tax concerns, legal/regulatory issues, time horizon, plan features, and workforce characteristics. The document then provides an example of the primary objective, funding objective, investment objective, and return objective of a specific DB pension plan in Kenya.
IND AS 19 provides the accounting requirements for employee benefits. It covers short-term benefits like wages and salaries, post-employment benefits like pensions and other retirement benefits, other long-term benefits, and termination benefits. For short-term benefits, an entity recognizes a liability when benefits are due to employees. Defined contribution plans recognize an expense for contributions payable, while defined benefit plans use actuarial techniques to account for obligations. Key adjustments to defined benefit obligations include benefits paid, past service costs from plan amendments, and remeasurements from actuarial gains and losses.
This project concerns employee pensions and is being introdu.pdfadinathfashion1
This project concerns employee pensions and is being introduced to you at this point because it
represents one of our individual projects for this semester. The project puts you in the position of a
benefits manager.
Project Overview:
You are charged with making recommendations as the leader of a pension study task force, for a
possible conversion of a company's benefit plan from a defined benefit plan to a defined
contribution plan. You are asked to make recommendations about how such a proposed defined
contribution plan would look and with communicating these changes to plan participants.
Final Products you need to submit to me to complete the pension project:
Recommendations from you, in the role of a leader of a pension study task force, for converting
the defined benefit plan of Eastern Alliance Company to a defined contribution plan. The revised
plan needs to meet ERISA standards for participant eligibility, enrollment, communication
standards and vesting requirements.
The project also requires that you draft a preliminary letter that will come from the Director of
Human Resources to plan participants communicating to them how Eastern Alliance Company's
pension plan has changed. This preliminary letter will serve as the basis to satisfy ERISA
requirements for communicating changes involving the pension plan to participants.
Memo
To: Benefits Manager
From: Burke Waltz, Director of Human Resources, Eastern Alliance
Re: Exploratory examination of converting Eastern Alliance's pension program from a defined
benefit pension plan to a defined contribution 401(k) plan.
As you know, due to the volatility of our pension expenses our organization, Eastern Alliance, has
decided to examine the feasibility of converting our defined benefit pension plan to a defined
contribution plan. Over the course of the past several years, our executives have come to the
conclusion that our defined benefits plan is unduly expensive for Eastern Alliance to maintain,
administratively burdensome, places a disproportionate amount of risk upon Eastern Alliance, and
is ineffective in attracting younger, more mobile employees to work for our organization because of
our vesting requirements.
The benefits survey which we purchase indicates that most companies which offer a retirement
plan offer a defined contribution plan, such as a 401(k), in which the employer promises certain
contributions to an employee's account but with no guaranteed retirement benefit. As a not-for-
profit firm interested in configuring our pension plan to reflect today's economic environment,
Eastern Alliance is forming a task force to examine the feasibility of converting our company's
pension plan from a defined benefit plan to a defined contribution plan. In your role as the Benefit
Manager for our firm, I am asking you to lead that task force.
To help you lead this task force, please find below details of the current Eastern Alliance ERISA
qualified defined benefit plan:
Characteristics of the.
The document discusses accounting for pensions and postretirement benefits. It distinguishes between accounting for an employer's pension plan versus a pension fund. It identifies types of pension plans such as defined-benefit and defined-contribution plans. It also explains how to calculate pension expense and amortize gains and losses. Financial statement reporting requirements for pension plans are described. Differences between accounting for pensions versus postretirement healthcare benefits are identified.
COVID-19: The Impact on Retirement PlansCBIZ, Inc.
As COVID-19 continues to impact the stock market and organizations around the world, we understand that you have concerns about how recent market fluctuations may affect your retirement plan. What you should know is that there are options you may have to minimize these effects on your business and your employees. We’ve developed a summary of these complex issues in this whitepaper. You will learn about:
- Impacts to both defined benefit plans and defined contribution plans
- Potential options for your organization to minimize negative effects on your business and your employees
- Legislative updates from the CARES Act
- Important considerations and actions to take next
A CASE STUDY ON EPF INCENTIVE REFUND SCHEME - CONDUCTED BY NABARUN CHAKRABORT...Nabarun Chakraborty
This research work is based on a study on whether G I Security Pvt Ltd is eligible to get a refund from EPF admin charges as per the Incentive Refund Scheme program of EPFO. It is an individual study conducted by Nabarun Chakraborty (HR Professional) in the year 2018 which is copyright protected as per The Copyright Act, 1957 (as amended by the Copyright Amendment Act 2012).
GRAND CANYON UNIVERSITY SCENARIO GENERATORModule 4 Scenari.docxwhittemorelucilla
The document discusses 10 common mistakes made in calculating compensation for defined contribution retirement plans. These include using the wrong definition of compensation from the plan documents, including severance pay which is not allowed, failing to follow the plan's compensation definition consistently, and not accounting for all pay-related items like bonuses and fringe benefits. It emphasizes carefully following the plan document's compensation definition and calculating it consistently for all employees and locations to avoid errors and noncompliance with IRS regulations.
This document provides an overview of accounting for post-employment benefits like pensions and other post-retirement benefits, as well as share-based compensation. It describes defined contribution plans and defined benefit plans for pensions. For defined benefit plans, it explains how the projected benefit obligation is calculated using assumptions about future compensation, discount rates, and other factors. It also discusses financial reporting of pension obligations and costs, and key disclosures around plan assumptions and funding status. Finally, it introduces accounting for share-based compensation like stock options and grants.
1) Small businesses represent 99.7% of all employers in the US and are important to the economy. However, only 44% of small businesses offer retirement plans to employees.
2) Retirement plans can benefit both businesses and employees. Businesses may reduce taxes and attract/retain talent, while employees can save tax-efficiently for retirement.
3) There are two main types of retirement plans for small businesses - IRA-based plans like SEPs and SIMPLEs, and 401(k) plans. IRA-based plans have lower costs but less features, while 401(k)s have more options but higher administrative fees. Financial advisors can help business owners select the best fitting option.
This document provides information about the Texas County & District Retirement System (TCDRS) retirement plan. It summarizes that TCDRS is a defined benefit plan created by the Texas legislature in 1967 that serves over 760 employers and 294,000 members. Key aspects of the plan include savings-based lifetime benefits, responsible funding, flexibility for employers, and investment returns averaging over 9% annually over 35 years. The document outlines how the plan works for both employees and employers and options for plan design and funding.
This document discusses the importance of developing an education policy statement for 401(k) plans. It notes that the shift from defined benefit plans to defined contribution plans has increased the responsibility of employees to manage their retirement savings. An education policy statement can help plan sponsors meet their fiduciary duties to provide participants with sufficient education and tools. It should include objectives like describing investment options and performance, key investment concepts, asset allocation, and retirement goals. The policy statement also specifies how education will be delivered through meetings, media, and interactive tools.
The document provides information about the Virginia Retirement System (VRS) retirement plan for staff employees at Virginia Tech, including details about the VRS plan types, hybrid plan components, contribution rates, eligibility requirements, and options for leaving employment and accessing retirement funds. Staff employees have a mandatory retirement contribution deducted from each paycheck that is distributed between a defined benefit and defined contribution plan under the VRS hybrid plan.
This document summarizes a presentation on qualified retirement plans for advisors. It covers trends affecting the retirement plan market like changes in demographics and regulations. It also discusses tools like contribution and deduction limits for 2015. Potential traps for plans are reviewed, such as asset protection issues and delinquent form filings. Tips provided include how to define compensation for plan purposes and timing of contribution deadlines. The presentation aims to help advisors better understand retirement plans to add value for clients and grow their practices.
Are you involved with the management of a 401(k) plan that is required to have an audit conducted? Please join Danielle Gisondo, CPA, Marilea Campomizzi, CPA and Rebecca Ferris, CPA for a presentation on what to expect the first time your plan needs an audit and what you should be doing now for an easy audit.
The document discusses the drivers and pressures for organizational change. It identifies that change comes from both external environmental pressures such as competition, regulations and technological changes as well as internal pressures like growth, leadership changes, and politics. Some of the key external pressures mentioned are globalization, hypercompetition, and reputation concerns. The document also examines why organizations may not change in response to environmental pressures or after crises, citing factors such as organizational learning difficulties and defensive priorities over innovation.
This document discusses evolutionary developmental biology and how changes in development can lead to evolutionary changes. It provides examples of modularity and molecular parsimony which help explain this. Modularity means parts of the body and DNA can develop differently. Molecular parsimony means organisms share developmental toolkit genes. The document then discusses specific examples like stickleback fish pelvic spines being due to different Pitx1 expression, and Darwin's finches having beak shape variations due to differing Bmp4 and Calmodulin expression levels. Mechanisms of evolutionary change include changes in location, timing, amount, or kind of gene expression.
Developmental plasticity allows an organism's phenotype to change in response to environmental conditions during development. There are two main types of phenotypic plasticity: reaction norms, where the environment determines the phenotype from a continuum of genetic possibilities, and polyphenisms, where discrete alternative phenotypes are produced. Examples include caterpillars changing appearance to match plant growth stages, frogs hatching early in response to vibrations, and temperature determining sex in crocodiles. Stressors like water levels can also influence development, as seen in spadefoot toads. Symbiotic relationships between organisms, like nitrogen-fixing bacteria in plant roots, are important to development and often involve vertical transmission from parents. Gut bacteria are also necessary for
This document discusses several genetic and environmental factors that can influence human development. Genetic factors like pleiotropy and mosaicism can result in syndromes with multiple abnormalities. The same genetic mutation can also produce different phenotypes depending on gene interactions. Environmental teratogens during critical periods of embryonic development can irreversibly damage organ formation, with alcohol, retinoic acid, and endocrine disruptors like bisphenol A and atrazine posing particular risks like fetal alcohol syndrome, cleft palate, lower sperm counts, and cancer. Both genetic and environmental heterogeneity contribute to the complexity of human development.
The endoderm forms the epithelial lining of the digestive and respiratory systems. It gives rise to tissues like the notochord, heart, blood vessels, and parts of the mesoderm. The endoderm comes from two sources - the definitive endoderm and the visceral endoderm. The transcription factor Sox17 marks and regulates the formation of the endoderm. The endoderm lines tubes in the body and gives rise to organs like the liver, pancreas, lungs and digestive system through the formation of buds and pouches along the foregut.
The document summarizes the development of the intermediate mesoderm and lateral plate mesoderm. The intermediate mesoderm forms the urogenital system including the kidneys, ureters, ovaries, fallopian tubes, testes and vas deferens. Kidney development occurs through the pronephros, mesonephros and metanephros stages. The lateral plate mesoderm splits into somatic and splanchnic layers and forms the heart through the merging of cardiac progenitor cells from both sides of the embryo. The heart tube loops to the right to begin resembling the four-chambered adult heart.
The paraxial mesoderm lies just lateral to the notochord and gives rise to vertebrae, skeletal muscles, and skin connective tissue. It is divided into somites which then form dermomyotomes and sclerotomes. Dermomyotomes develop into dermatomes that make dermis and myotomes that form back, rib, and body wall muscles. Sclerotomes form the vertebrae and rib cage. Somitogenesis occurs through a clock-wavefront model where somites sequentially segment from cranial to caudal regions under the influence of signaling molecules like retinoic acid and FGF.
The document summarizes ectodermal placodes and the epidermis. It discusses how placodes give rise to sensory structures like the eye lens, inner ear, and nose. It describes the different cranial placodes that form sensory tissues and nerves, including the anterior placodes that form the pituitary gland and eye lens. The intermediate placodes form nerves involved in sensation of the face and hearing/balance. The epidermis derives from surface ectoderm under the influence of BMPs and forms the protective outer layer of skin and its appendages like hair, sweat glands, and teeth.
- The neural plate transforms into a neural tube through a process called neurulation regulated by proteins like BMP and transcription factors like Sox1, 2, and 3.
- Primary neurulation involves the elongation, bending, and convergence of the neural folds before their closure at the midline to form the neural tube. Key regulation events involve hinge points at the midline and dorsolateral edges.
- Neural tube defects can occur if closure fails, as in spina bifida where the posterior neuropore remains open, preventing proper spinal cord development.
Mammalian development begins with fertilization and cleavage of the egg. The egg develops membranes that allow development outside of water. In mammals, the placenta exchanges gases and nutrients between the embryo and mother. Cleavage is rotational, with zygotic genes activating later than other animals. Cells compact and the morula forms an inner cell mass and trophoblast cells. The trophoblast secretes fluid to form a blastocyst cavity. The inner cell mass forms the epiblast and hypoblast, which generate the embryo and extraembryonic tissues through gastrulation. Axis formation is guided by gradients of genes like HOX and left/right asymmetries are regulated by proteins including Nodal.
- Drosophila melanogaster is a useful model organism for studying development due to its short life cycle, fully sequenced genome, and ease of breeding.
- Early Drosophila development involves syncytial cleavage where nuclei divide without cell division, specifying the dorsal/ventral and anterior/posterior axes.
- Fertilization occurs when sperm enters an egg that has already begun specifying axes; maternal and paternal chromosomes remain separate during early divisions.
This document summarizes key patterns in animal development. It describes that animals undergo gastrulation where cells migrate to form germ layers and axes. Animals are categorized into 35 phyla based on features like germ layers, organ formation, and cleavage patterns. It describes that diploblastic animals have two germ layers while most are triploblastic with three germ layers. Triploblastic animals are further divided into protostomes and deuterostomes based on mouth formation. The document also provides examples of cleavage patterns in snails which are spirally arranged in either a dextral or sinistral pattern determined by maternal factors.
1) Sex determination in mammals is primarily determined by the XY sex determination system, with females having XX and males having XY. The SRY gene on the Y chromosome causes the development of testes.
2) The gonads are initially bipotential but develop into either ovaries or testes based on the sex chromosomes. Testes secrete AMH and testosterone to direct male development while ovaries secrete estrogens for female development.
3) Gametogenesis includes the process of meiosis which produces haploid gametes from diploid germ cells in the gonads. In females, oogenesis begins in the embryo but arrests until puberty while spermatogenesis only occurs at puberty in males.
Stem cells are unspecialized cells that can divide and differentiate into specialized cell types. There are several types of stem cells defined by their potency, including totipotent stem cells found in early embryos, pluripotent stem cells in the embryo, and multipotent adult stem cells. Stem cell regulation is controlled through extracellular signals from the stem cell niche and intracellular factors that influence gene expression and cell fate. Researchers have also induced pluripotency in adult cells by introducing genes that code for key transcription factors.
This document discusses cell-to-cell communication and how it allows for the development of specialized tissues and organs through three main mechanisms: cell adhering, cell shape changing, and cell signaling. It describes how cells interact at the cell membrane through various receptor and ligand proteins. These interactions can be homophilic or heterophilic, and occur through direct contact between neighboring cells (juxtacrine signaling) or over short distances (paracrine signaling). Differential adhesion and cadherins allow cells to sort themselves into tissues based on adhesion strengths. The extracellular matrix and integrins also influence cell communication and development.
Differential gene expression refers to the process where different genes are activated in different cell types, leading to cellular specialization. While all cells contain the full genome, only a small percentage of genes are expressed in each cell. Gene expression is regulated at multiple levels, including differential transcription, selective pre-mRNA processing, selective mRNA translation, and posttranslational protein modification. The most common mechanisms involve regulating transcription through epigenetic modifications of chromatin and the use of transcription factors.
The document summarizes key stages in animal development from fertilization through organogenesis. It begins with fertilization and cleavage, followed by gastrulation where the three germ layers (endoderm, mesoderm, ectoderm) are formed. During organogenesis, organs develop from the germ layers. Metamorphosis may also occur to transition organisms like frogs from immature to sexually mature forms. Examples are provided of developmental processes in frogs and other model organisms like fruit flies and plants. Cell behavior and patterning during these stages are also discussed.
The document discusses considerations for small businesses when hiring employees. It covers deciding when to hire an employee, defining job roles, writing job descriptions, attracting and evaluating candidates, selecting the right hire, training employees, rewarding and compensating employees, and managing ownership and dividends when there are family business partners involved. The key aspects of setting up an employee program for a small business are planning job roles, writing thorough job descriptions, developing fair hiring and review processes, providing training, and establishing clear compensation and ownership structures.
This document discusses various legal issues that small business owners should be aware of, including:
- Understanding the different types of laws (federal, state, local) that may apply to a small business.
- Hiring an experienced small business attorney to provide legal advice and represent the business as needed.
- Choosing an appropriate legal structure for the business, such as a sole proprietorship, partnership, corporation, or LLC.
- Protecting the business name as intellectual property and complying with regulations regarding contracts, liability, taxation and other legal matters.
This document discusses risk management and insurance for small businesses. It begins by defining risk for business owners and identifying common sources of risk such as financial investments, theft, nonpayment of debts, and natural disasters. It then examines risks related to a business's property, personnel, customers, and intangible property. The document provides strategies for managing these risks, such as developing policies and procedures, securing valuable assets, and obtaining different types of insurance. It concludes by discussing ways for businesses to share risk through joint ventures, industry groups, and government funding programs.
Andreas Schleicher presents PISA 2022 Volume III - Creative Thinking - 18 Jun...EduSkills OECD
Andreas Schleicher, Director of Education and Skills at the OECD presents at the launch of PISA 2022 Volume III - Creative Minds, Creative Schools on 18 June 2024.
This presentation was provided by Racquel Jemison, Ph.D., Christina MacLaughlin, Ph.D., and Paulomi Majumder. Ph.D., all of the American Chemical Society, for the second session of NISO's 2024 Training Series "DEIA in the Scholarly Landscape." Session Two: 'Expanding Pathways to Publishing Careers,' was held June 13, 2024.
How Barcodes Can Be Leveraged Within Odoo 17Celine George
In this presentation, we will explore how barcodes can be leveraged within Odoo 17 to streamline our manufacturing processes. We will cover the configuration steps, how to utilize barcodes in different manufacturing scenarios, and the overall benefits of implementing this technology.
Beyond Degrees - Empowering the Workforce in the Context of Skills-First.pptxEduSkills OECD
Iván Bornacelly, Policy Analyst at the OECD Centre for Skills, OECD, presents at the webinar 'Tackling job market gaps with a skills-first approach' on 12 June 2024
Elevate Your Nonprofit's Online Presence_ A Guide to Effective SEO Strategies...TechSoup
Whether you're new to SEO or looking to refine your existing strategies, this webinar will provide you with actionable insights and practical tips to elevate your nonprofit's online presence.
THE SACRIFICE HOW PRO-PALESTINE PROTESTS STUDENTS ARE SACRIFICING TO CHANGE T...indexPub
The recent surge in pro-Palestine student activism has prompted significant responses from universities, ranging from negotiations and divestment commitments to increased transparency about investments in companies supporting the war on Gaza. This activism has led to the cessation of student encampments but also highlighted the substantial sacrifices made by students, including academic disruptions and personal risks. The primary drivers of these protests are poor university administration, lack of transparency, and inadequate communication between officials and students. This study examines the profound emotional, psychological, and professional impacts on students engaged in pro-Palestine protests, focusing on Generation Z's (Gen-Z) activism dynamics. This paper explores the significant sacrifices made by these students and even the professors supporting the pro-Palestine movement, with a focus on recent global movements. Through an in-depth analysis of printed and electronic media, the study examines the impacts of these sacrifices on the academic and personal lives of those involved. The paper highlights examples from various universities, demonstrating student activism's long-term and short-term effects, including disciplinary actions, social backlash, and career implications. The researchers also explore the broader implications of student sacrifices. The findings reveal that these sacrifices are driven by a profound commitment to justice and human rights, and are influenced by the increasing availability of information, peer interactions, and personal convictions. The study also discusses the broader implications of this activism, comparing it to historical precedents and assessing its potential to influence policy and public opinion. The emotional and psychological toll on student activists is significant, but their sense of purpose and community support mitigates some of these challenges. However, the researchers call for acknowledging the broader Impact of these sacrifices on the future global movement of FreePalestine.
4. 3-4
Postretirement Benefits
Defined Pension Plan -- Employer-promises
monetary benefits to employees after retirement, e.g.,
monthly stipend until death.
Defined Contribution Plan – Plan specify the amount
of pension contribution that the employer makes to the
plan.
Two kinds of Retirement Plans
11. 3-11
Post Retirement Benefits
Three steps:
• Determine how much is the
annual benefit and for how many
years.
• Determine the PV of the above
payments.
• Determine how many years to
“spread” the cost.
12. 3-12
Postretirement Benefits
Illustration of Pension Accumulation and Disbursement for a Defined
Benefits Plan
Funds required at employees’
retirement:
Present value of 10 payments of
$20,000 per annum with a
discount rate of 8% per annum
$134,200
Annual payments into the
Fund required to accumulate
to $134,200 in 15
years with a discount
rate of 8%per
annum
10 years
Annual benefits of
$20,000 paid to
employee for 10 years
PostretirementPreretirement Retirement
Benefits =
$20,000 per annum
Contributions =
$4,942 per annum
15 years
Step 1
13. 3-13
Determining Future Annual Benefit Cost
Step 1
Need to determine the following
related to each employee:
• Life expectancy
• Employee turnover
• Compensation growth
• Expected rates of return
• Interest rates
15. 3-15
Determining Future Annual Benefit Cost
Who can assist with determining
and calculating the needed
information?
Answer: An Actuary
16. 3-16
Determining Future Annual Benefit Cost
Step 2
How much needs to be “accrued”
at the time of an employee’s
retirement?
17. 3-17
Postretirement Benefits
Illustration of Pension Accumulation and Disbursement for a Defined
Benefits Plan
Funds required at employees’
retirement:
Present value of 10 payments of
$20,000 per annum with a
discount rate of 8% per annum
$134,200
Annual payments into the
Fund required to accumulate
to $134,200 in 15
years with a discount
rate of 8%per
annum
10 years
Annual benefits of
$20,000 paid to
employee for 10 years
PostretirementPreretirement Retirement
Benefits =
$20,000 per annum
Contributions =
$4,942 per annum
15 years
Step 2
18. 3-18
Determining Future Annual Benefit Cost
Step 3
How much is required to be
expensed each year so that the
amount needed to be “accrued” at
the time of an employee’s
retirement is achieved?
How do we determine the number
of years?
19. 3-19
Determining Future Annual Benefit Cost
Step 3
How much is required to be
expensed each year so that the
amount needed to be “accrued” at
the time of an employee’s
retirement is achieved?
Answer – PV of an Annuity
20. 3-20
Determining Future Annual Benefit Cost
Step 3 - continued
How do we determine the number
of years in which to accrue the
expense?
21. 3-21
Determining Future Annual Benefit Cost
Step 3 - continued
How do we determine the number
of years in which to accrue the
expense?
Answer - The estimated remaining
years of employment.
22. 3-22
Postretirement Benefits
Illustration of Pension Accumulation and Disbursement for a Defined
Benefits Plan
Funds required at employees’
retirement:
Present value of 10 payments of
$20,000 per annum with a
discount rate of 8% per annum
$134,200
Annual payments into the
Fund required to accumulate
to $134,200 in 15
years with a discount
rate of 8%per
annum
10 years
Annual benefits of
$20,000 paid to
employee for 10 years
PostretirementPreretirement Retirement
Benefits =
$20,000 per annum
Contributions =
$4,942 per annum
15 years
Step 3
23. 3-23
Postretirement Benefits
Pension Basics
Pension Plan – agreement by the employer to provide pension benefits involving
3entities: employer-who contributes to the plan; employee-who derives benefits; and
pension fund
Pension Fund – account administered by a trustee, independent of employer,
entrusted with responsibility of receiving contributions, investing them in a proper
manner, & disbursing pension benefits to employees
Vesting – specifies employee’s right to pension benefits regardless of whether
employee remains with the company or not; usually conferred after employee has
served some minimum period with the employer
Pension Plan Categories
Defined benefit – a plan specifying amount of pension benefits that employer promises
to provide retirees; employer bears risk of pension fund performance
Defined contribution – a plan specifying amount of pension contributions that
employers make to the pension plan; employee bears risk of pension fund performance
Focus of Pension Analysis
Defined benefit plans constitutes the major share of pension plans and are
the focus of analysis given their implications to future company
performance and financial position
24. 3-24
Managing Pension Plan
Company’s prefer defined contribution
plans since the amount of expense can
be modified each year and the expense
amount can easily be determined.
The expense amount of a defined benefit
plan is much more difficult to determine
and the amount in future period can
fluctuate significantly.
25. 3-25
Managing Pension Plan
CFO desired goals:
• Steady earnings.
• Limited disclosure
• Footnote only if possible
• Least impact on earnings
• Least fluctuation in earnings
• Least recorded amount of a
liability
26. 3-26
Recognized Pension Cost
The recognized pension cost included in net income (i.e., the net periodic
pension cost) is a smoothed version (smoothing process, defers volatile,
one-time items) of the actual economic pension cost for the period.
Expected return on plan assets is recognized in reported pension
expense.
Difference between the actual and expected return is deferred. These
deferred amounts are gradually recognized through a process of
amortization.
Thus, net periodic pension cost includes service cost, interest cost,
expected return on plan assets and amortization of deferred items.
Articulation of Balance Sheet and Income Statement Effects
The net deferral for the period is included in other comprehensive income
for the period
The cumulative net deferral is included in accumulated other
comprehensive income, a component of shareholders’ equity.
Postretirement Benefits
Pension Accounting Requirements
27. 3-27
Pension Costs
Recurring:
• Service cost
• Interest cost
• Expected return on assets
Changes in assumptions and economics:
• Actual return on assets different than
expected.
• Prior service cost (additional benefits)
• Actuarial gain / losses due to change in
assumptions
28. 3-28
Pension Plan Example
Why is interest cost a portion of
pension expense?
Why is return on plan assets
considered a negative expense?
29. 3-29
Pension Plan Example
Why is interest cost a portion of
pension expense?
To compensate for the liability
amount being discounted.
Why is return on plan assets
considered a negative expense?
The earnings from plan assets is a
source of funding the plan.
30. 3-30
Pension Plan Example
What would be the company’s pension
expense given the following:
• Service cost is $125,000
• Interest cost is $ 25,000
• Expected return on assets $50,000
31. 3-31
Pension Plan Example
What would be the company’s pension
expense given the following:
• Service cost is 125,000
• Interest cost is 25,000
• Expected ROA (50,000)
• Total expense $100,000
32. 3-32
Pension Costs
Recurring:
• Service cost
• Interest cost
• Expected return on assets
Changes in assumptions and economics:
• Actual return on assets different than
expected.
• Prior service cost (additional benefits)
• Actuarial gain / losses due to change in
assumptions
33. 3-33
Impact on Plan Expense
What is the impact on the plan if we
have any of the following:
• Change in discount rate
• Change in expected return on assets
• Change in compensation growth rate
34. 3-34
Impact on Plan Expense
Change in discount rate
Higher rate lower liability
Change in expected return on assets
Higher return lower cost
Change in compensation growth rate
Increase in rate higher liability
35. 3-35
Impact on Plan Expense
What is the impact on the plan if we have
any of the following:
• Additional pension benefits
• Increase in life expectancy
• Increase in expected employee turnover
36. 3-36
Impact on Plan Expense
Additional pension benefits
Increase liability and future expense
Increase in life expectancy
Increase liability and future expense
Increase in expected employee turnover
Decrease liability and future expense
37. 3-37
Expected vs Actual Return on Plan Assets
How would you account for the following change?
Plan assets $1,000,000
Expected return 8%
Expected earnings $80,000 (Reduction of pension expense)
Actual return 3%
Actual earnings $30,000
Average life of plan assets 10 years
38. 3-38
Expected vs Actual Return on Plan
Assets
Accounting Entries:
Year 1
Cash $30,000
Expected return $80,000 (Reduction of current pension expense)
Deferred asset $50,000
(An amount that will be amortized in future periods that will increase
pension expense.)
Year 2
Amortization of deferred asset $5,000 (Expense)
Deferred asset $5,000
39. 3-39
Change in Actuarial Assumptions
How would you account for the following change?
Increase in life expectancy $40,000
Higher employee turnover $20,000
Increase in expected compensation $30,000
Lower expected discount rate $100,000
Average remain years of service for employee - 15 years
40. 3-40
Change in Actuarial Assumptions
How would you account for the following change?
Year 1
Deferred assets $150,000
Projected benefit obligations $150,000
Year 2
Amortization of deferred asset $10,000 (Expense)
Deferred assets $10,000
41. 3-41
Postretirement Benefits
Economic pension cost -- net cost arising from changes in net economic position (or funded
status) for a period; includes both recurring and nonrecurring components along with return on
plan assets.
Recurring pension costs consist of two components:
Service cost – actuarial present value of pension benefit earned by employees
Interest Cost – increase in projected benefit obligation arising when pension
payments are one period closer to being made; computed by multiplying
beginning-period PBO by the discount rate
Return on plan assets:
Actual return on plan assets – pension plan’s earnings, consisting
of investment income—capital appreciation and dividend and interest
received, less management fees; plus realized and unrealized
appreciation (or minus depreciation) of other plan assets; Used to offset cost
to arrive at a net economic pension cost.
Nonrecurring pension costs consist of two components:
Actuarial Gain or Loss – change in PBO that occurs when one or more
actuarial assumptions are revised in estimating PBO
Prior Service Cost – effect of changes in pension plan rules on PBO
Economic Pension Cost
42. 3-42
Evaluation of the following assumptions:
Compensation increases 5.5% per year
(Average for the last ten years)
Employee turnover 7.2% per year
(Average for the last five years)
Expected asset yield 7.5% per year
(Average for the last twenty years)
Expected discount rate 8.0% per year
(Average for the last twenty years)
48. 3-48
Expected Return on Assets
What is a reasonable rate of return on
assets with the following mix?
Short term bonds 45%
Long term bonds 25%
Equities 30%
50. 3-50
Postretirement Benefits
Accumulated benefit obligation (ABO) – actuarial present value of future pension
benefits payable to employees at retirement based on their current compensation and
service to-date
Project benefit obligation (PBO) – actuarial estimate of future pension benefits payable to
employees on retirement based on expected future compensation and service to-date
Plan Assets – The funds contributed to the plan are called plan assets because these are
invested in capital markets
Funded Status of the Plan – Difference between the value of the plan assets and the PBO
which represents the net economic position of the plan
** Note: Plan is overfunded (underfunded) when value of plan assets exceeds (is less
than) PBO***
Alternative Definitions of Pension Obligation
Relation between Plan Assets and Funded Status
51. 3-51
Postretirement Benefits
Pension benefits -- Employer-promises monetary
benefits to employees after retirement, e.g., monthly
stipend until death
Other Postretirement Employee Benefits (OPEB)
-- Employer-provided non-pension (usually
nonmonetary) benefits after retirement, e.g., health care
and life insurance
Two kinds of Postretirement
Benefits
52. 3-52
Postretirement Benefits
Pension Accounting Requirements
Recognized Status on the Balance Sheet
Recognizes the funded status of the pension plans on the
balance sheet.
Pension assets and obligations are netted against each other
(as funded status) rather than separately reported both as an
asset and a corresponding liability.
Companies do not report the funded status of pension plans
as a separate line item on the balance sheet, instead, it is
embedded in various assets and liabilities.
54. 3-54
Postretirement Benefits
(similar to pension accounting)
(1) Other Pension Employee Benefits (“OPEB”) costs are recognized when incurred
rather than when actually paid out.
(2) Assets of the OPEB plan are offset against the OPEB obligation, and returns from
these assets are offset against OPEB costs.
(3) Actuarial gains and losses, prior service costs, and the excess of actual return
over expected return on plan assets are deferred and subsequently amortized.
Features of OPEB Accounting
55. 3-55
Analyzing Postretirement Benefits
Five-step procedure for analyzing postretirement benefits:
(1)Determine and reconcile the reported and economic benefit cost
and liability (or asset).
(2)Make necessary adjustments to financial statements.
(3)Evaluate actuarial assumptions (discount rate, expected return,
growth rate) and their effects on financial statements.
(4)Examine pension risk exposure (arises to the extent to which
plan assets have a different risk profile than the pension
obligation).
(5)Consider the cash flow implications of postretirement
benefit plans.
Postretirement Benefits