With the recent acquisition of another company. the company acquired two different pension programs and two sections that do non flux with the company. The company is below the belt with the demands in describing the two pension programs. Besides the company needs to find the right method for the two sections to be eliminated. Therefore. the memo describes the coverage demands for the pension programs of defined part. defined benefit. and other postretirement programs. The memo besides discusses the procedure to extinguish the unwanted sections.
A defined part program is one of the two most often used pension programs. “A defined part program set away a certain sum that the employer is to lend to the program each period” ( Schroeder. Clark. & A ; Cathey. 2011. p. 456 ) . In this program. the employer may put a per centum that will be paid each twelvemonth without doing any promises on the existent result of the benefits to be paid at retirement. The coverage demands for this program are really simple and straightforward. The employer will enter the per centum it has decided to lend to the employee’s pension program as a pension disbursal. In this program. the hard currency contributed peers the pension disbursal. The employer besides has to unwrap the program in the fiscal statements. The house should include the being of the program. the groups covered. how the parts are determined. and any important affairs impacting the comparison ( Schroeder. Clark. & A ; Cathey. 2011 ) .
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A defined benefit program is the other most often used pension programs. Harmonizing to Schroeder. Clark. & A ; Cathey ( 2011 ) . “a defined benefit program specify the sum of pension benefits to be paid out to be after receivers in the future” ( p. 456 ) . In this program. the employer states they will pay a per centum of the norm of the employee’s highest five years’ wage. The coverage demands for a defined benefit program are much more complicated than the defined part program. The company will utilize a benefit program formula to find the cost. The company “must so acknowledge the difference between the plans’ projected benefit duty and its just value of program assets as either an plus or a liability” ( Shaw. 2009. Balance-Sheet Reporting Under SFAS 158 ) . The jutting benefit duty is the actuarial present value formulated from the benefit expression. The company besides has to unwrap:
a. A description of the program
B. The sum of net periodic pension cost demoing the dislocation of cost
c. A agenda accommodating the funded position of the program
d. The weighted-average assumed price reduction rate and rate of compensation addition
e. Sums and types of securities included in the program assets ( Financial Accounting Standards Board. 1985. Disclosures ) .
Other Postretirement Plans
Other postretirement programs are non-cash benefits available for retired persons. Examples of these benefits can be wellness insurance. life insurance. legal services. and tuition credits. The coverage for these programs are similar to the defined benefit program. They besides cost the company significant sum of money like the defined benefit program.
Elimination of Sections
In order to extinguish the two sections the company acquired. the house must first place the cost associated with the sections. The house would set the cost into two classs. evitable costs and ineluctable costs. The evitable cost are the cost that will travel off one time the section is gone. The ineluctable costs will stay even once the section eliminated. The ineluctable costs will so be distributed to the staying sections.
Fiscal Accounting Standards Board. ( 1985 ) . Statement of Financial Accounting Standards
No. 87. Retrieved from hypertext transfer protocol: //www. fasb. org/jsp/FASB/Document_C/DocumentPage? Criminal Investigation Command
=1218220127991 & A ; acceptedDisclaimer=true
Schroeder. R. G. . Clark. M. W. . & A ; Cathey. J. M. ( 2011 ) . Fiscal Accounting
Analysis: Text and Cases ( 10th ed. ) . Hoboken. New jersey: John Wiley & A ; Sons. Inc. . Shaw. K. W. ( 2009 ) . New Accounting Rules for Defined Benefit Pension Plans. Retrieved from
hypertext transfer protocol: //www. nysscpa. org/cpajournal/2008/308/essentials/p32. htm
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