中级会计学英文版课件：ch17 Pensions and Other Employee Future Benefits

1、Chapter 17Pensions and Other Employee Future BenefitsCopyright 2014 Pearson Canada Inc.17- 1LEARNING OBJECTIVESL.O. 17-1. Explain the nature of pension plans and distinguish between dened contribution and dened benet plans. L.O. 17-2. Apply the accounting standards for dened contribution pension pla

2、ns. L.O. 17-3. Analyze an array of pension plan data to determine the amount of pension expense for dened benet pension plans.Copyright 2014 Pearson Canada Inc.17- 2L.O. 17-4. Integrate pension plan information by preparing the note disclosures including the reconciliation of the pension asset or li

3、ability recorded on a companys accounts with the amount recorded by the pension plan. L.O. 17-5. Analyze the effect of actuarial assumptions on the nancial statement assets, liabilities, and income, and evaluate the appropriateness of assumptions used to account for pensions. LEARNING OBJECTIVES (Co

4、ntinued)Copyright 2014 Pearson Canada Inc.17- 3A. INTRODUCTIONMost companies offer employee benefits in addition to cash salaries and wages.Benefits include extended health, dental, and pensions.Benefits can be a significant part of an employees payTwo important reasons for benefit arrangements: i.R

5、isk sharing, andii. tax advantages relative to cash paymentsAccounting issue: How to account for rights earned now for benefits to be consumed in the futureCopyright 2014 Pearson Canada Inc.17- 4B. NATURE OF PENSION PLANS (L.O.17-1)Pension plans involve three parties:EmployerEmployeePension trust Pe

6、nsion trust - legal entity that holds the investments and discharges the obligations of a pension planCopyright 2014 Pearson Canada Inc.17- 5Flows Between Parties to a Pension PlanCopyright 2014 Pearson Canada Inc.17- 61. Defined Contribution PlansDened contribution plan - A pension plan that specie

7、s how much funds the employer needs to contributePlan places investment risk on employeesPoor returns reduce the pension benefitsHigh returns result in higher benefit payments Copyright 2014 Pearson Canada Inc.17- 72. Defined Benefit Plans Dened benet plan - A pension plan that species how much in p

8、ension payments employees will receive during their retirementInvestment risk is on employersInadequate contributions or poor investments returns results in an underfunded pension , and vice-versaCopyright 2014 Pearson Canada Inc.17- 8Defined Benefit Plans (Continued)Underfunded pension needs increa

9、sed employer contributionsOverfunded pension results in reduced employer contributionsCopyright 2014 Pearson Canada Inc.17- 9C. ACCOUNTING FOR DEFINED CONTRIBUTION PLANS (L.O. 17-2)Record compensation expense for the amount of contribution owed based on agreed formulaRecord cash payment or accrued p

10、ension contribution payable until paid,Dr. Pension Expensexxx Cr. Cash or Pension Contribution Payable xxxPension cost could be capitalized as appropriate.Copyright 2014 Pearson Canada Inc.17- 10D. ACCOUNTING FOR DEFINED BENEFIT PLANS (L.O. 17-3 AND L.O. 17-4)Employer guarantees to employees a certa

11、in amount of future benefitsMismatch in timing of payments and earning the benefitsSeveral estimates required to determine amount to accrueCopyright 2014 Pearson Canada Inc.17- 11Defined Benefit Plans: Estimates Required When will each employee be entitled to retire and receive pension payments? For

12、 how long will each employee be entitled to pension payments? How long will employees liveHow much will be the periodic pension payments for each employee? Copyright 2014 Pearson Canada Inc.17- 12Defined Benefit Plans: Estimates required (Continued) What part of the expected benet payments relate to

13、 services provided in the current year? What is the value of the pension obligation at retirement? How much in plan assets are required now in order to satisfy the pension obligation at retirement? Copyright 2014 Pearson Canada Inc.17- 13Defined Benefit Plans: How do Accountants Calculate the Foreca

14、sts?Accountants rely on actuaries for forecastsActuary - a professional who specializes in the estimation of risks and uncertainties Copyright 2014 Pearson Canada Inc.17- 14Defined Benefit Plans: Determining the Expense Relating to the Benefits Steps Required1. Estimate the pension payments the empl

15、oyee will be entitled to receive2. Estimate the amount of pension assets that will be required to fund pension3. Estimate the amount of pension assets required now to obtain the amount required when the pension benefits began (2)Amount represents the current service costCopyright 2014 Pearson Canada

16、 Inc.17- 15Key definitions relevant to pension accounting Current service cost - The increase in the present value of pension obligations due to an employees provision of services during the current period Accrued benet obligation - The present value of pension benets that employees have earned Copy

17、right 2014 Pearson Canada Inc.17- 161. What to Account for in Defined Benefit Plans Two objectives of accounting for defined benefit pension plans:1. present amount of pension expense for year2. present net asset or liability position of the plan.For defined benefit pension plans, pension expense re

18、flects expected pension performanceCopyright 2014 Pearson Canada Inc.17- 17What to Account for in Defined Benefit Plans (continued)Actual pension performance will deviate from expected; the deviation is recorded through OCIFor defined benefit plans, there are:Four components of pension expenseTwo co

19、mponents of OCICopyright 2014 Pearson Canada Inc.17- 18What to Account for in Defined Benefit Plans (continued)Pension expense components: current service costPast service costinterest cost on pension obligations Expected income from plan assetsOther comprehensive income e. actuarial gains and losse

20、s on plan obligations f. Unexpected gains and losses on plan assetsCopyright 2014 Pearson Canada Inc.17- 19Defined Benefit Plans Expense in relation to PartiesCopyright 2014 Pearson Canada Inc.17- 20a. Current Service CostIncrease in the present value of the pension obligation that results from the

21、employees current servicesComponent always presentCurrent service cost information provided by the plans actuaryCopyright 2014 Pearson Canada Inc.17- 21b. Past Service CostThe change in the present value of pension obligation due to initiation, amendment, or curtailment of a pensionInitiation increa

22、ses pension expense; an amendment may increase or decrease expense, curtailment reduces expense Copyright 2014 Pearson Canada Inc.17- 22c. Interest CostIncrease in the pension obligation due to the passage of timeIFRS species the use of yields on high-quality corporate bondsTerm of the bonds should

23、match the maturity of the term of the pension obligationsLong-term rates more appropriate Copyright 2014 Pearson Canada Inc.17- 23d. Expected Income From Plan AssetsIncome from plan assets increases value of plan assetsExpected income rather than actual amounts usedUse same rate used in estimating i

24、nterest cost Deviations of actual investment results and the expected income accumulate in actuarial gains and lossesCopyright 2014 Pearson Canada Inc.17- 24e. Actuarial Gains and Losses Actuarial gain - favourable difference between actual and expected amounts for pension assets or obligationsActua

25、rial loss - unfavourable difference between actual and expected amounts for pension assets or obligationsIFRS requires actuarial gains and losses to be recorded through OCI without recycling Copyright 2014 Pearson Canada Inc.17- 25f. Unexpected Gains and Losses on Plan AssetsUnexpected gains and los

26、ses on plan assets - are deviations of fair value from the expected values of the plan Recorded through OCI without recycling through income.Copyright 2014 Pearson Canada Inc.17- 26 g. Summary (of Defined Benefit Pension Accounting) Three steps involved:Determine fair values of plan assets and liabi

27、lities at year-end. Report net balance on balance sheet2. Determine periods pension expense. Pension expense less periods plan contributions is expected change in the pension plan assets and liabilities.Copyright 2014 Pearson Canada Inc.17- 27 17-D.1g Summary of Defined Benefit Pension Accounting De

28、termine expected values of pension assets and liabilities using the opening value plus the expected change from (2) above. Difference between actual fair values from (1) above and these expected fair values are the measurement adjustments that flow through OCISee Illustration 17-6 for journal entrie

29、sCopyright 2014 Pearson Canada Inc.17- 282. Implementing Pension Accounting forDefined Benefit PlansInformation collected and synthesized include: Pension Trustees Report provides information about changes on pension plan assets, such as:Contribution to the planExpected income on plan assetsBenefits

30、 paid out of the plan to retirees, andActual value of the plan assets at end of yearCopyright 2014 Pearson Canada Inc.17- 29Implementing Pension Accounting forDefined Benefit Plans (continued)2. Pension Actuarys Report - provides information about changes in the obligations of the pension plan, such

31、 as: current service costPast service costInterest cost on the pension obligationBenefits paid out of the plan to retirees, andActual value of the pension obligation at year-endCopyright 2014 Pearson Canada Inc.17- 30Implementing Pension Accounting forDefined Benefit Plans (continued)When all the in

32、formation is put together, one can construct the six components of pension expense and OCI as illustrated in Exhibit 17-8Copyright 2014 Pearson Canada Inc.17- 313. Presentation and Disclosure (L.O. 174) Only four accounts affected by accounting for defined benefit pension plans: cash, pension expens

33、e, OCI and defined benefit asset or liability. Pension expense and dened benet liability or asset separately identied on the income statement or balance sheet If not disclosure required in the notesCopyright 2014 Pearson Canada Inc.17- 32Presentation and Disclosure (continued)Disclose components of

34、pension expense General prohibition against offsetting assets and liabilities applies. If more than one defined benefit plan, show separatelyDisclosure required for plan assets and liabilitiesSchedule showing movements in plan assets and liabilities from beginning to end of yearSee Exhibit 17-18Copy

35、right 2014 Pearson Canada Inc.17- 33E. OTHER ISSUES Pension accounting raises other issues of interest:1. Settlement and curtailments2. Asset ceiling3. Multi-employer plans4. Other long-term employee benefitsCopyright 2014 Pearson Canada Inc.17- 341. SettlementsA settlement occurs when an enterprise

36、 extinguishes all or part of its pension obligations May be done through a lump-sum cash paymentResults in a change in pension obligation and asset valuesAny gains or losses flow through incomeCopyright 2014 Pearson Canada Inc.17- 352. Asset Ceiling Asset ceiling is the present value of (i) the redu

37、ction in future contributions plus (ii) the amount of any refunds from the pension plan, if any. This is relevant only if the pension is overfunded, and represents the maximum benefit to the sponsor of the plan from the overfunding. Copyright 2014 Pearson Canada Inc.17- 363. Multi Employer Plans Pen

38、sion plan may have several sponsorsDefined contribution plans have no additional complexity risk with employeesMulti-employer defined benefit plans risk shared with other employersIAS requires application of defined benefit plan accountingIf insufficient information apply defined contribution accoun

39、ting with disclosures.Copyright 2014 Pearson Canada Inc.17- 374. Other Long-term Employee Benefits Health services may be provided to retired employeesAccounting should follow defined benefit pension plansAccrue expense for benefits earned by employees in year earnedAccrue liability for the provision for benefits in the futureMany estimates required Copyright 2014 Pearson Canada Inc.17- 38F. A PRACTIC