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PREVIEW OF CHAPTER
20
Intermediate Accounting
IFRS 2nd Edition
Kieso, Weygandt, and Warfield
20-2
20
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
1. Distinguish between accounting for
the employers pension plan and
accounting for the pension fund.
2. Identify types of pension plans and their
characteristics.
3. Explain measures for valuing the
pension obligation.
4. Identify amounts reported in financial
statements.
20-3
Employer
Employer
Retired
Employees
20-4
Contributions
Benefit Payments
Assets &
Liabilities
LO 1
20-5
LO 1
20
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
1. Distinguish between accounting for the
employers pension plan and
accounting for the pension fund.
2. Identify types of pension plans and
their characteristics.
3. Explain measures for valuing the
pension obligation.
4. Identify amounts reported in financial
statements.
20-6
Employer contribution
determined by plan (fixed)
20-7
LO 2
20-8
20
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
1. Distinguish between accounting for the
employers pension plan and
accounting for the pension fund.
2. Identify types of pension plans and their
characteristics.
3. Explain measures for valuing the
pension obligation.
4. Identify amounts reported in financial
statements.
20-9
20-10
LO 3
ILLUSTRATION 20-3
Different Measures of
the Pension Obligation
20-11
IASBs
choice
LO 3
20
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
1. Distinguish between accounting for the
employers pension plan and
accounting for the pension fund.
2. Identify types of pension plans and their
characteristics.
3. Explain measures for valuing the
pension obligation.
4. Identify amounts reported in
financial statements.
20-12
ILLUSTRATION 20-4
Presentation of Funded Status
20-13
LO 4
20-14
20-15
Three Components
of Pension Costs
LO 4
20-16
Service Cost
Component of
Pension Expense
20-17
Net Interest
Component of
Pension Expense
LO 4
20-18
Remeasurements
LO 4
20-19
ILLUSTRATION 20-6
Determination of Pension Assets
20-20
LO 4
ILLUSTRATION 20-8
Computation of Actual Return on Plan Assets
20-21
LO 4
20
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
1. Distinguish between accounting for the
employers pension plan and
accounting for the pension fund.
2. Identify types of pension plans and their
characteristics.
3. Explain measures for valuing the
pension obligation.
4. Identify amounts reported in financial
statements.
20-22
20-23
LO 5
Fin. Cost/
Annual
Int. Exp
Pension
Expense
Cash
MEMO RECORD
Pension
Defined
OCI-
Asset /
Benefit
Plan
Gain/Loss
Liability
Obligation
Assets
Jan. 1, 2015
Service costs
9,000
Interest expense
10,000
Interest revenue
(10,000)
(9,000)
10,000
(8,000)
8,000
Benefits
$100,000 x 10%
100,000
(10,000)
Contributions
Journal entry
(100,000)
7,000
0
9,000
(8,000)
(7,000)
(1,000)
-
(1,000)
(112,000)
111,000
Pension Expense
9,000
Cash
8,000
Pension Asset/Liability (Provision)
20-26
1,000
(112,000)
111,000
(1,000)
LO 5
20
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
1. Distinguish between accounting for the
employers pension plan and
accounting for the pension fund.
2. Identify types of pension plans and their
characteristics.
3. Explain measures for valuing the
pension obligation.
4. Identify amounts reported in financial
statements.
20-27
20-28
LO 6
LO 6
Items
Fin. Cost/
Annual
Int. Expense
Pension
OCI-
Asset /
Gain/Loss
Liability
MEMO RECORD
Defined
Benefit
Plan
Obligation
Expense
Jan. 1, 2016
Additional PSC 2016
Balance Jan. 1, 2016
Service costs
Interest expense
Interest revenue
Contributions
Benefits
Journal entry
Dec. 31, 2016
Cash
-1,000
-112,000
-81,600
111,000
-1,000
-193,600
-9,500
-19,360
111,000
81,600
(1)
9,500
(2)
Assets
19,360
-11,100
8,000
11,100
20,000
-8,000
-214,460
134,100
-20,000
8,260
91,100
-20,000
-79,360
-80,360
Pension Expense
91,100
Fin. Cost/Int Expense
8,260
Cash
20,000
Pension Asset/Liability (Provision)
79,360
20-31
(214,460)
134,100
(80,360)
LO 5
20
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
1. Distinguish between accounting for the
employers pension plan and
accounting for the pension fund.
2. Identify types of pension plans and their
characteristics.
3. Explain measures for valuing the
pension obligation.
4. Identify amounts reported in financial
statements.
20-32
20-33
LO 7
Remeasurements
Asset Gains and Losses
Difference between the actual return and the interest revenue
computed in determining net interest.
Illustration: Shopbob Company has plan assets at January 1, 2015,
of 100,000. The discount rate for the year is 6 percent, and the actual
return on the plan assets for 2015 is 8,000. In 2015, Shopbob should
record an asset gain of 2,000, computed as follows.
20-34
ILLUSTRATION 20-15
LO 7
Remeasurements
Liability Gains and Losses
Any change in actuarial assumptions that affect the amount of
the defined benefit obligation.
20-35
20-36
LO 7
Annual
Pension
Expense
Cash
Pension
Defined
OCI-
Asset /
Benefit
Plan
Gain/Loss
Liability
Obligation
Assets
Jan. 1, 2017
-80,360
Service costs
13,000
Interest expense
21,446
Interest revenue
-13,410
Contributions
MEMO RECORD
134,100
-13,000
-21,446
13,410
-24,000
24,000
Benefits
10,500
Asset loss
1,410
Liability loss
26,594
Journal (2)
entry
20-37
Assets $134,100 x 10%
-214,460
8,036
13,000next slide
-24,000
(3) Calculation
($105,400)
net
28,004
-25,040
-10,500
-1,410
-26,594
liability
LO 7
20-38
LO 7
Pension Expense
13,000
8,036
24,000
Pension Asset/Liability
25,040
LO 7
20
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
1. Distinguish between accounting for the
employers pension plan and
accounting for the pension fund.
2. Identify types of pension plans and their
characteristics.
3. Explain measures for valuing the
pension obligation.
4. Identify amounts reported in financial
statements.
20-40
20-41
20-42
LO 8
ILLUSTRATION 20-20
Computation of Other
Comprehensive Income
ILLUSTRATION 20-21
Computation of
Comprehensive Income
20-43
LO 8
ILLUSTRATION 20-22
Comprehensive Income
Reporting
20-44
LO 8
ILLUSTRATION 20-23
Computation of
Accumulated Other
Comprehensive Income
ILLUSTRATION 20-24
Reporting of
Accumulated OCI
20-45
LO 8
20-46
LO 8
20-47
The excess of the fair value of the plan assets over the
defined benefit obligation is classified as a noncurrent
asset.
LO 8
20-48
LO 8
20-49
LO 8
20
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
1. Distinguish between accounting for the
employers pension plan and
accounting for the pension fund.
2. Identify types of pension plans and their
characteristics.
3. Explain measures for valuing the
pension obligation.
4. Identify amounts reported in financial
statements.
20-50
ILLUSTRATION 20-27
Differences between Pensions and
Postretirement Healthcare Benefits
20-51
LO 9
20-52
20-54
20-55
20-56
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20-57