Exam 14: Pensions and Postretirement Benefits

U.S.tax laws limit the deductibility of contributions to pension plans for firms whose plans are underfunded.

The return on plan assets component of pension expense for a defined benefit pension plan is

Periodic pension expense computed under IFRS generally consists only of current service cost,past service cost and net interest on the net defined benefit liability or asset.

ERISA introduced minimum funding requirements and limited pension investments in employer stock to 10% of plan assets.

Which of the following statements is correct?

In a defined contribution plan the employer bears the risk that the ultimate pension payments will be large enough to sustain a comfortable retirement.

Postretirement benefits are computed based upon

The components of pension expense are

The Shelast Corporation adopted a defined benefit pension plan on January 1,2014 and has provided the following information: • The projected benefit obligation on January 1,2014 was $2,160,500. • The 2014 service cost totaled $250,000;the 2015 service cost totaled $275,000. • Annual amortization of prior service costs is $216,050. • The settlement/discount rate is 10%. • The pension plan funding during 2014 was $200,000;the pension plan funding during 2015 was $225,000. • The actual return on plan assets was $19,000 during 2015. What is the projected benefit obligation balance as of December 31,2015?

A pension plan is underfunded if the projected benefit obligation exceeds the fair value of the pension plan assets.

The Shasti Corporation reported the following for the year ending December 31,2014: • Service cost: $142,610 • Plan assets,January 1,2014: $1,200,000 • Prior service cost amortization: $21,150 • Expected return on plan assets: 9% • Actual return on plan assets: 8.5% • Pension expense: $175,760 • Actuarially determined discount rate: 8% What was the projected benefit obligation on January 1,2014?

The pension liability that must be shown on the balance sheet of the plan sponsor is the

The payments made by the employer to fund a defined contribution pension plan create a pension fund asset on the balance sheet of the employer.

Companies are required to disclose the dollar amount of pension retirement benefits they expect to pay in each of the next ten years.

The Brand Corporation's December 31,2014 balance sheet reports a pension liability of $243,000.On December 31,2014,the projected benefit obligation was $4,975,000,the fair value of the plan assets was $4,679,000,and the accumulated benefit obligation was $3,482,500.The December 31,2014 balance sheet should report a pension liability totaling

Which of the following statements pertaining to defined benefit pension plans is not correct?

Current accounting standards require that the discount rate used for pension plans be

The anticipated life span of the employees after retirement must be taken into consideration in determination of pension expense for a defined contribution pension plan.

Service cost is the increase in the discounted present value of the pension benefits ultimately payable that is attributable to an additional year's employment.

The projected benefit obligation is the present value of the retirement benefits earned to date by the employees and is based on future salary levels.