BU397 Lecture Notes - Lecture 7: Financial Statement, Accrual, Pension
Document Summary
The pension benefit is made up of all items affecting the funded status during the period except the company contributions into the plan assets. Current service cost and interest cost: service costs for benefits earned by employees and the interest cost accrued on the abo during the current period are recognized and included in pension expense in the same period. If the plan is a contributory one, the service cost is reduced by any contributions made by employees. Interest is calculated on the abo that was effective as of the first day of the fiscal year. If positive, reduces the cost to the employer of sponsoring an employee pension: actual return is used. Instantly change the amount of the employers obligation: the total cost of the amendment is recognized immediately in pension expense. The abo is based on actuarial valued used for funding purposes: doesn"t take future salaries into account. Uses abo for accounting purposes: projected benefit obligation.
