Pension Accounting

Anonymous
timer Asked: Mar 19th, 2019
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Question Description

Many business organizations have been concerned with providing for the retirement of employees since the late 1800s. During recent decades, a marked increase in this concern has resulted in the establishment of private pension plans in most large companies and in many medium- and small-sized ones.

The substantial growth of these plans, both in numbers of employees covered and in amounts of retirement benefits, has increased the significance of pension costs in relation to the financial position, results of operations, and cash flows of many companies. In examining the costs of pension plans, a CPA encounters certain terms. The components of pension costs that the terms represent must be dealt with appropriately if generally accepted accounting principles are to be reflected in the financial statements of entities with pension plans.

Answer the following questions in the Discussion Board:

  1. Define a private pension plan. How does a contributory pension plan differ from a noncontributory plan?
  2. Differentiate between “accounting for the employer” and “accounting for the pension fund.”
  3. Explain the terms “funded” and “pension liability” as they relate to:
    1. The pension fund.
    2. The employer.
  4. Discuss the theoretical justification for accrual recognition of pension costs.
  5. Discuss the relative objectivity of the measurement process of accrual versus cash (pay-as-you-go) accounting for annual pension costs.
  6. Distinguish among the following as they relate to pension plans.
    1. Service cost.
    2. Prior service costs.
    3. Vested benefits.

Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2016). Accounting for pensions and postretirement benefits. Intermediate accounting (16th ed.). (p. 1175). New York, NY: John Wiley & Sons, Inc.

Tutor Answer

fareeha27
School: UC Berkeley

Hello, Please find the attached dscussion. If you have any question, please let me know.

Pension Discussion
1. One can define the private pension as a plan in which contributes are made by the company to
a fund grounded on dissimilar factors like employees’ mortality rate, pay rate and years of
service. Then the company adds to the plan until the retirement of the employee and then the
funds can be drawn by the employee during retirement. The company in such plans holds every
risk (Kieso, Weygandt, & Warfield, 2016).
One can define the contributory plan like the one in which employee contributes throughout the
time they are in employment with the intention of having money after their retirement. The risk
is faced by the employee in this plan, and sometimes empl...

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Anonymous
awesome work thanks

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