...Subject: Pension Plan Disclosure and Reporting Requirement CC: This brief memo will address the topic of Pension Plans. Specifically, it shall discuss the two basic types of pension plans and the other postretirement plan. Then it shall examine the purpose of pension plan reporting requirements, their effect on the financial statements, and the significance of each type of pension plan. It will also examine the positive and negative implications of each of the pension plans. Defined Benefit Pension Plan - A defined benefit plan is a retirement plan set up to pay a fixed annual amount to eligible employees during their retirement. It is called defined benefit because the quarterly or annual contribution is based upon an actuarial determination of what the participants' retirement benefits should be, not on profits. The formulas look at how much money must be contributed in order for there to be enough money to pay a FIXED amount of benefit(s) to recipients in the future. These projections use a reasonable expected rate of return (401kpsp.com, 2012). Defined Contribution Plan- A defined contribution plan is a retirement plan that requires that an individual "account" be set up for each participant in the plan. It is called "defined contribution" because a participant can only contribute a fixed maximum amount to the plan each year. The contributions are not based on the expected retirement benefit, but rather on a percentage that is specified in the plan (401kpsp.com...
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...Accounting SUBJECT: Reporting of Pension Plan in acquisition of Company ABC DATE: June 11, 2013 In the acquisition of Company ABC, many factors must be considered, including the acquisition of the company’s pension plans and the addition of two segments. After careful analysis, the two operating segments have caused a loss to the company and must be eliminated. This memo will outline the reporting procedures for the pension plans and the necessary steps that must be taken to eliminate the segments. Defined Contribution Plan One of the most frequently encountered and widely used pension plans is the defined benefit plan. Under this plan, the employer is required to contribute a pre-determined amount of the employee’s salary to this pension plan. The amount of benefits paid out at the onset of retirement are not guaranteed and “are determined by the return earned on the invested pension funds during the investment period” (Schroeder, Clark, & Cathey, 2011). Employees also have the option of designating where their funds are invested, whether it be in stocks or in fixed-income securities. The defined contribution plan has become popular among employers due to no risk on behalf of the employer and the ease of reporting. Variations of the plan include: thrift plans, savings plans, 401(k) plans, profit-sharing plans, and incentive savings plans. Because of its simplicity in reporting, the defined contribution plan periodic pension expense is equal to the...
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...Selecting of a good location for the factory enables employers to spend less money but still increase profitability for the company. The cost of manufacturing a product can be reduced through a proper factory location selection by considering such factors as minimum wage, employment insurance, government pension plan and other taxes which will be discussed later in this report. Location that offers lower cost always attracts more companies and investors. And in this report, Bloomington will be more attractive to company since it offers lower minimum wage and employment insurance, pension contribution and other taxes. After calculating the total cost to open new plant in Bloomington and Toronto, the supply chain analyst’s final decision will be made based on those costs. TABLE OF CONTENTS INTRODUCTION 2 BACKGROUND 2 DISCUSSION 2 Minimum Wage 2 Government Pension Plan 3 Other factors 3 CONCLUSION 4 Works Cited 5 INTRODUCTION As a supply chain analyst, it is very important to consider some factors which might impact positively or negatively in location of a new factory. By analyzing such factors as minimum wage paid, employment insurance, government pension plan and other taxes, the report will be helpful for the employer during the decision making process. In this report, Bloomington, Indiana, USA and Toronto, Ontario, Canada will be selected as proposed location for consideration. Which location that gives the less cost in term of operational and administrative...
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...INTRODUCTION No business functions without finance. For there to be business concern therefore, there must be money. Development has however, changed the business operations in the capital globalize markets. People invest in business to make returns. It is therefore imperative for an individual to invest as well as institutional investors. Prior to development in capital markets, individual investors used to make their own investment decisions. But all these are changed now as individual investors have been replaced by institutional investors. This is also known as shareholding. Institutional investors play a very enviable role in corporate governance since the primary responsibility lies in side the board room, with the top management not with people and system imposed from outside. Looking at Board of Directors and investors, investors are seen as “sources of finance” or “partners in the enterprise”. This means that shareholders are seen as faceless, financial resource whose trust may be limited and need for checks and balances real? Or are they part of the business? Companies do take advice and guidance from their institutional shareholder in domestic and foreign business growth decisions (Stuffman 2008). This takes us to Hermes Fund Management, an institutional investment Corporation, which plays a strategic role in the activities of Total and Premier Oil. Total and Premier Oil has sought assistance from Hermes in managing business concern in Burma. This case study...
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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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...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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...Pension Reporting and Segment Elimination Requirements Deborah Hunter, Stephanie Murray, James Newsome, Sharon Stubbs, and Star Troutman ACC 541 January 14, 2013 Shauki Smith MEMORANDUM TO: CEO FROM: Team A DATE: January 14, 2013 SUBJECT: Pension Reporting and Segment Elimination Requirements CC: Shauki Smith This memo serves to provide an explanation of required reporting for define contribution, defined benefit, and other postretirement plans. In addition to pension reporting requirements, an explanation of the requirements for eliminating segments is also provided. Defined Contribution Plan In a defined contribution plan, companies will define how much they plan to contribute each period to the employee’s retirement benefits. The company defines the period. The company will contribute the amount to a funding agency such as a pension fund. The company is not liable for the amount of benefits the employee receives upon retirement. Therefore, the company must only contribute the amount that was set forth each period. Defined benefit plans, on the other hand, are more complex. Instead of contributing each period to the employees retirement account, the company agrees to provide a certain benefit amount each period upon retirement. Therefore, the company must ensure that the funding for such plans are adequate to cover the employee’s retirement benefit plan. Non-GAAP Funding Methods A company that offers defined benefit plans to their employees...
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...Fujino | cc: | | Date: | June 21, 2015 | Re: | Segments and Pension Plan | | | The recent acquisition by our company has created two issues which need to be addressed; the two segments which are required to be reported and the two different pension plans. My goal is to eliminate the segments as well as determine the appropriate method for reporting both pension plans. Discussed herein are descriptions of the defined contribution plan, the defined benefit plan, as well as other post retirement plans. Furthermore, I have include a recommendation as to eliminating the two segments. The expansion of our organization is indicative of our growth and success; however, with change comes difficulty in fully disclosing each financial aspect in accordance with Generally Accepted Accounting Principles. In our financial reporting, we must be thorough in explaining each of our pension plans. Beginning with the defined contribution plan, contributed to by both employee and employer of which only employer contributions are guaranteed. Accounting for this method is simple in that we shall record our liability to the extent of the contributions made (Schroeder, Clark, & Cathey, 2011). The defined benefit plan is more complex; this plan guarantees a specific benefit amount per month at retirement. The benefit amount is determined by several factors: employee salary, years of employment, and age. With this plan, we have full control over investing decisions, as such we carry...
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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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...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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...29, 2010 Sub: Acquisition & Pension Plans Acquisition Analysis & Benefits from Acquisition The 100% acquisition of other business by the manufacturing company will be beneficial. It is because; full acquisition of the other business will bring two new segments for the manufacturing company that will pose a higher growth rate. It will also facilitate two new pension plans that will be beneficial to motivate the employees. But at the same time, the two segments and pension plans are entirely new for the business that may affect its profitability and effectiveness. The 100% acquisition by the manufacturing company will facilitate opportunity of the business expansion by intensifying its existing business activities. The manufacturing business would be able to capture new market and business areas by eliminating the need of setting up the business in new areas. It would also be helpful to establish a competitive advantage for the business that would cause an increase in its competitive position. The acquisition would increase the efficiency in resource utilization that would reduce competition in the industry. The business expansion would cause an increase in market share of manufacturing company that would increase awareness about the product and services of it. Thus, acquisition will be beneficial for manufacturing company. Pension Plans The 100% acquisition of other company by the manufacturing company will also bring two new pension plans that will be effective to increase...
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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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...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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...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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...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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