...Controller DATE: January 29, 2015 SUBJECT: Required Reporting for Pensions and Other Postretirement Plans Several issues have to be considered in the wake of the firm’s recent acquisition of a new company. First, the acquired company has two different pension plans whose reporting requirements are unfamiliar to the firm. Second, the acquired company has two segments that do not fit the firm’s requirements, and should be targeted for closure. This memo describes the reporting requirements of pension plans, namely, defined contribution plans, defined benefit plans and Other Postretirement Plans or OPEBs. In addition, this memo describes how to close an unwanted segment. A defined contribution plan sets forth a certain amount that the employer is to contribute to the plan each period. In the other hand, defined benefit plans specify the amount of pension to be paid out to plan recipients in the future (Cathey, Clark & Schroeder, 2011). The fixed monthly income to be paid to the employee is calculated using a pre-determined formula that usually takes into account the employee’s years of service, annual salary, and in some instances, age (Ruppel, 2010). Both pension plans guarantee the employee will receive monetary compensations, either directly or indirectly, from the employer at retirement. The financial reporting of defined contribution plans is straightforward. The employer only records the pension expense that equals the cash contribution to the employee. For...
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...Please cite this paper as: Severinson, C. (2010), “The New IAS 19 Exposure Draft”, OECD Working Papers on Finance, Insurance and Private Pensions, No. 5, OECD Publishing. doi: 10.1787/5km7rq4hlw5g-en OECD Working Papers on Finance, Insurance and Private Pensions No. 5 The New IAS 19 Exposure Draft Clara Severinson * JEL Classification: G23, G32, M41, M52 * OECD, France THE NEW IAS 19 EXPOSURE DRAFT Clara Severinson September 2010 OECD WORKING PAPER ON FINANCE, INSURANCE AND PRIVATE PENSIONS No. 5 ——————————————————————————————————————— Financial Affairs Division, Directorate for Financial and Enterprise Affairs Organisation for Economic Co-operation and Development 2 Rue André Pascal, Paris 75116, France www.oecd.org/daf/fin/wp ABSTRACT/RÉSUMÉ The New IAS 19 Exposure Draft At the end of April 2010, the International Accounting Standards Board (IASB) published an exposure draft with proposed changes to International Accounting Standard No. 19 (IAS 19). IAS 19 is the current standard for the financial reporting of company pension obligations that stem from defined benefit (DB) and similar plans. It is required for exchange-listed companies in many parts of the world. If enacted, the changes to IAS 19 proposed by the IASB are expected to have a significant impact on company financials on a global basis. The following paper summarizes the proposed changes as presented in the April 2010 exposure draft and explores some of their implications...
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...MEMO Our company has recently acquired another company which has two segments and two different pension plans. These segments could create reporting issues which we would want to eliminate. To fulfill this objective, we should first understand what the different postretirement plans are and what their reporting requirements are after which we would identify steps to eliminate the two segments. * Defined Benefit Pension Plan In a defined benefit pension plan, employee gets a specified monthly benefit at retirement. The amount of benefit may be decided by the company based on the salary and service level of the employee. The reporting requirement for this pension plan is to include information in two categories. Category 1: The plan should include information in two financial statements: (a) A statement of plan net assets that provides information about the fair value and composition of plan assets, plan liabilities, and plan net assets (b) A statement of changes in plan net assets that provides information about the year-to-year changes in plan net assets The notes requirement should address the following: * Brief plan description * Summary of significant accounting policies * Information about contributions, legally required reserves, and investment concentrations Category 2: Information should be presented in two schedules: (a) A schedule of funding progress that reports the actuarial value of assets, the actuarial accrued liability, and the relationship...
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...Reporting Paper Janis Maraya ACC 541 February 20, 2015 William Montgomery To: CEO From: Controller Date: February 20, 2015 ------------------------------------------------- Subject: Pension Plans and Eliminating Segments This memo is to provide a response to the new CEO who is requesting information regarding the following areas. The first discussion is and explanation of the required reporting on retirement plans that includes defined contribution, defined benefit, and other postretirement plans. The memo will also include what may happen when two segments are to be eliminated. Defined Contribution Plan A defined contribution plan is when an employer puts aside a certain percentage periodically to the employees benefit plan. There are two types of defined contribution plan: Defined contribution health and welfare plans— This plan is an account for the employee that calculates the amount by using the participating employee’s account instead of his or her benefits. “The benefits a plan participant will receive are limited to the amount contributed to the participant's account, investment experience, expenses, and any forfeitures allocated to the participant's account. These plans also include flexible spending arrangements. (FASB ASC 715-70-20)” Defined contribution postretirement plan— A participant that uses this plan is provided an individual plan that is determined by the amount of services he or she has rendered. “Under a defined contribution postretirement...
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...EXECUTIVE COMPENSATION DISCLOSURE HANDBOOK: A Practical Guide to the SEC’s Executive Compensation Disclosure Rules Perkins Coie LLP Danielle Benderly Susan Daley Iveth Durbin Sue Morgan Kelly Reinholdtsen Executive Compensation Disclosure Handbook: A Practical Guide to the SEC’s Executive Compensation Disclosure Rules REVISED MAY 2010 Danielle Benderly Susan Daley Iveth Durbin Sue Morgan Kelly Reinholdtsen RR DONNELLEY Copyright RR Donnelley, 2010 (No claim to original U.S. Government works) All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the authors and publisher. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice or other expert assistance is required, the services of a professional should be sought. Printed in the United States of America. RR DONNELLEY About RR Donnelley Financial Services Group As the world’s largest provider of integrated communications, RR Donnelley successfully leverages our global platform, industry leading service organization and enduring financial stability to help our clients achieve their goals. With over 145 years of...
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...September 3rd, 2012 Re: Acquisition of ABC Company: Pension Plan and Segment Reporting The acquisition of ABC Company resulted in the acquisition of its two pension plans, to include a defined contribution plan, and a defined benefit plan. The transaction also resulted in XYZ Company gaining control of two segments that offer no real value to its current business, as they are redundant, and therefore will be eliminated. What follows is an overview of the reporting requirements for the pensions, and what must take place for the two segments to be disposed of. Under the defined contribution plan, ABC Company contributed 6% of their employees’ salary, per pay period, to a pension fund. The eventual retirement benefit is determined by the rate of return on the invested pension funds (Schroeder, 2011). In other words, ABC Company makes no guarantee of a specified amount that would be paid to an employee upon retirement. ABC Company’s only expense for the defined contribution plan is the cash that they contributed to the pension plan fund. Accordingly, the amount of the promised annual contribution would equal the periodic pension expense (Schroeder, 2011). XYZ Company will be required to disclose the plan on financial statements, as well as describe the employee groups covered and the basis for determining contributions, as well as any significant changes from one period to another (Schroeder, 2011). Under the defined benefit plan, ABC Company guaranteed an employee an amount of...
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...Restructuring Debt Data Understanding the reporting and disclosure requirements for the different types of debt regarding debt restructuring is imperative. The manager of this company has requested an explanation of the above regarding bonds payable, notes payable, and capital leases. This paper should satisfy any questions about these topics. Long-Term Liabilities Included are several types of long-term liabilities; bonds payable, notes payable, and capital leases. Each of these types of debts have some similarities and some differences regarding the reporting and disclosure requirements, so to better understand those requirements and ensure proper application of requirements, an explanation is given. Loan covenants or restrictions usually come with long-term debt to protect both lenders and borrowers (Kieso, Weygandt, and Warfield, 2007). The information included in the loan covenant is the amount authorized to be issued, interest rate, due dates, call provisions, property pledged as security, sinking fund requirements, working capital, or any other restrictions. All of this information should be included in the body of the financial statements or the notes for a complete understanding of the financial position of the company (Kieso, et al., 2007). Bonds Payable Companies should report long-term bond liabilities at their amortized value. If a bond issues at a premium, the total bond liability reported at the end of the reporting period shall be the total par value of the...
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...Is the Difference in Accounting Treatment of Post-Retirement Benefits under IFRS Beneficial or Detrimental to the Financial Position of a Company Currently Reporting Under US GAAP? Megan N. Cook, CPA, CFE Accountancy 521 Professor Lawrence March 9, 2009 The first pension plan offered by an American employer was that of American Express in the year 1875. Amex’s plan did not resemble the plans that we see in today’s time; the first “modern” defined benefit plan was created in 1940 by the automotive behemoth General Motors. These plans of the past still do not resemble plans that we are familiar with today. In the past, employers could exercise a “pension put” option and, in essence, close the plan down at the current level of funding and turn the assets over to the retirees. This is not an optimal situation, as many plans at the time were severely under funded and retirees would be left with pennies on the dollar of what they were counting on for retirement. (Fortune, 2005) Post-retirement benefits are volatile on a couple of different fronts; up until the reforms in 1974 which created ERISA and the PBGC, employees had to put blind faith in their employers to secure their futures after their working years were over. (Fortune, 2005) On another front, these benefits pose a significant accounting problem – how should a company account for the costs and liabilities associated with these benefits they had to give their employees at a later and relatively indeterminable...
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...Financial Parkway October 25, 2011 TO: ABC Financial FROM: Larrissa Thompson SUBJUCT: Required Reporting This memo is to notify the company of required reporting for defined contribution, defined benefit, and other postretirement plans. It will also discuss what should happen when trying to eliminate two segments. Once a company acquires another business the operations, policies, and practices will have to change. When looking at pensions they are special in the category of liabilities. This expense for periodic costs isn’t tied to changes in the balance sheet. When a pension plan is established a company must make estimates of future obligations, and it must reflect in the financials as long term liabilities. There are some obstacles that the company may face while trying accurately to forecast such as not knowing future employee salary levels, which the future benefits are based on, vesting events, and investment active of fund assets. The company must apply the proper discount rate that should be selected to discount the estimated obligations of the future to a present value. There are reporting requirements that should be considered for a business with multiple business segments that has separate postretirement plans and plans to eliminate them. The reporting for defined contribution, defined benefits, and other postretirement plans should be researched and the proper procedures on eliminating the two segments have to be explained or understood...
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...GASB 68: An Examination of Affects to the Pension Problem Including Stakeholder Interests Private retirement systems are regulated by the Pension Benefit Corporation (Employee Retirement Income Security Act of 1974); state and local governments are not subject to federal regulation but rather voluntarily comply with GASB standards. (Mattrell, 2013) With all the newsworthy stories involving public pensions, analysts were becoming increasingly critical of GASB regulation over the pension systems. When compared to the requirements of the private retirement systems, it was lacking in transparency. Thus, GASB replaced statement 27 with 68. Government entities with a financial period ending June 30, 2015 will be first to experience the implementation of GASB 68. Many feel that GASB 68 is part of the solution for the ever-increasing public pension crisis in the United States but is reporting for the first time ever in most cases a rather large Net Pension Liability (NPL) on the face of the financials going to solve the problem of underfunded pensions. Employees within the public sector generally enjoy a rather generous pension when compared to others but when they are looked at for their sustainability they fail miserably. Chicago retirement system for teachers, fire fighters and others us underfunded by nearly $24 billion, with residents facing potential 150% increase in property taxes. (Birrer, 2014) Public pension systems in the United States are in need of change if they...
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...MFRS 119 Employee Benefits MFRS 119 define employee benefits as to prescribe the accounting and disclosure by employers for employee benefits. Thus, it replaces MASB Approved Accounting Standard IAS 19 Accounting for Retirement Benefits in the Financial Statements of Employees. The major changes from old IAS 19 are set out in the Basis for Conclusions. The Standard does not deal with reporting by employee benefit plans (see FRS 126 Accounting and Reporting by Retirement Benefit Plans ). From MFRS 119, there are four categories of employee benefits to be identified which are: (a) short-term employee benefits, such as wages, salaries and social security contributions, paid annual leave and paid sick leave, profit-sharing and bonuses (if payable within twelve months of the end of the period) and non-monetary benefits (such as medical care, housing, cars and free or subsidised goods or services) for current employees; (b) post-employment benefits such as pensions, other retirement benefits, post-employment life insurance and post-employment medical care; (c) other long-term employee benefits, including long-service leave or sabbatical leave, jubilee or other long-service benefits, long-term disability benefits and, if they are payable twelve months or more after the end of the period, profit-sharing, bonuses and deferred compensation; and (d) termination benefits. 3.1 Accounting Policy Used on MFRS 119 Employee Benefits for AZRB AZRB act or implement the employee benefits...
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...Craig Chapman, Page 1 CRAIG J. CHAPMAN Assistant Professor - Accounting Information and Management Kellogg School of Management, Northwestern University Jacobs Center, Room 6227, 2001 Sheridan Road, Evanston, IL 60208 Telephone: (847) 491-2662, Fax: (847) 467-1202 E-mail: c-chapman@kellogg.northwestern.edu SSRN Research Page: http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=417740 Education HARVARD BUSINESS SCHOOL, BOSTON, MA Doctor of Business Administration degree, Accounting and Management, 2008. Dissertation Committee: Professors Paul M. Healy, V.G. Narayanan & Thomas J. Steenburgh. HARVARD BUSINESS SCHOOL, BOSTON, MA Master of Business Administration degree, 2003. Graduated with High Distinction as a George F. Baker Scholar. UNIVERSITY OF OXFORD – MAGDALEN COLLEGE, ENGLAND Master of Arts degree in Mathematics, 1995 Bachelor of Arts degree in Mathematics, 1989. Graduated with Honors. Publications “Buy-Side vs. Sell-Side Analysts’ Earnings Forecasts” with Boris Groysberg and Paul M. Healy. The paper examines relative accuracy and bias of different analysts and proposes a number of possible explanations for the findings that the analysts at the Buy-side firm studied appear significantly less accurate and more optimistic than those working for sell-side firms. Financial Analysts Journal, July/August 2008, Vol. 64, No. 4: 25-39. “An Investigation of Earnings Management through Marketing Actions” with Thomas J. Steenburgh. Combining new, hand-collected...
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...Features of the Website The succeeding paragraphs will describe the major features of the US Department of Labor Website at http://www.dol.gov/dol/topic/health-plans/cobra.htm. The first feature is Wages Subtopics. Wages Subtopics provide additional information employees can use to help monitor their wage benefits. By choosing from the Wages subtopics list it will also help employees narrow their browsing. This information is useful so that employees and employers understand employee qualification for benefit programs. The Department of Labor enforces the Fair Labor Standard Act (FLSA), which sets basic minimum wage and overtime pay standards. These standards are enforced by the Department's Wage and Hour Division. This law was enacted in 1938. It protects workers by setting standards for minimum wage, overtime pay, record keeping and youth labor. FLSA covers full-time and part-time workers in the private sector and in federal, state, and local governments. The law may apply to you because of the type of company or organization for which you work, known as enterprise coverage, or the type of work you do, called individual coverage (Roseburg, 2013). Minimum Wage Non-exempt employees must be paid a national minimum wage established by the US Congress. As of July 24, 2009 that wage is $7.25 per hour. Some states have set their own minimum wage. The employer must pay federal or state wages-whichever is higher. Overtime Pay Employers must give overtime pay to non-exempt...
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...Reporting Paper INTERNAL MEMORANDOM To: CEO From: Papa Rydoo Date: October 25, 2010 Reference: Postretirement Plans Introduction Acquisition of a company leads to many changes in the company and especially in the area of the retirement benefit plans for our company. It is complicated adjusting to benefits plans but with the required reporting, the transition will be smooth. The different types of pension plans we will focus on are; defined contribution, defined benefit, and other postretirement plans. Defined Contribution Plan (DCP) Defined contribution plan is a retirement plan that an employer promises to contribute toward an employee’s retirement funds periodically. Most companies will match whatever an employee contributes towards the fund. However, there would be no promise as to the ultimate benefits that would be paid into the funds because the retirement benefits are determined by the returned earned on the contributions to the funds during the investment period (Schroeder, Clark, & Cathey, 2005, p. 445). DCP is recorded on the financial statements as a pension expense, it is a straightforward transaction and it carries no risk for the employer because all the risks go to the employee. Defined Benefit Plan (DBP) Defined benefit plan is the amount of retirement benefits an employee would receive in the future but the terms are defined by the company. Most companies would have terms that would require employees to have at least 30 years of service, and...
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...Week four Full Disclosure Paper The full disclosure principle in accounting calls for financial reporting of any financial facts significant enough to influence the judgment of an informed reader. Another definition would be the principle under which all material facts (whose non-disclosure may render a financial statement misleading) must be disclosed. For example if by hiding anything in your cash flow statement would be misleading to a potential investor or partner, then you have not fully disclosed all of your financial data. The full disclosure principle states that any and all information that affects the full understanding of a company's financial statements must be included with the financial statements. Some items may not affect the ledger accounts directly. These would be included in the form of accompanying notes. Examples of such items are outstanding lawsuits, tax disputes, and company takeovers. Disclosure has increased because of the complexity of the business environment, the necessity for timely information, and the desire for more information on the enterprise for control and monitoring purposes (Rutgers, n.d., p. 4) The benefit is that an investor can determine the actual taxes paid by the enterprise. Such a determination is particularly important if the enterprise has substantial fluctuations in its effective tax rate caused by unusual or infrequent transactions. In some cases, companies only have income in a given period because of a...
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