Chapter 20-Accounting for Pensions and Postretirement Benefits Flashcards Preview

Intermediate Accounting II > Chapter 20-Accounting for Pensions and Postretirement Benefits > Flashcards

Flashcards in Chapter 20-Accounting for Pensions and Postretirement Benefits Deck (26)
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1

Accumulated benefit obligation

The employer’s pension obligation that is computed using the deferred compensation amount on all years of service performed by employees under the plan--both vested and nonvested--using current salary levels.

2

Accumulated Postretirement Benefit Obligation (APBO)

The actuarial present value of future benefits attributed to employees’ services rendered to a particular date.

3

Actual return on plan assets

The return earned by the accumulated pension fund assets in a particular year. The return can be from interest, dividends, and realized and unrealized changes in the fair market value of the plan
assets.

4

Actuaries

Individuals who are trained through a long and rigorous certification program to assign probabilities to future events and their financial effects.

5

Amortization of unrecognized prior service cost

Recognition of the cost of pension plan amendments that provide for an increase in benefits for employee service provided in prior years.

6

Attribution period

The period of service during which the employee earns postretirement benefits under the terms of the plan.

7

Capitalization approach

The approach for recording pension plans that represents the economic substance of the pension plan arrangement over its legal form.

8

Contributory pension plan

A pension plan where the employees bear part of the cost of the stated benefits or voluntarily make payments to increase their benefits.

9

Corridor approach

An approach used to limit the growth in the Unrecognized Net Gain or Loss account by amortizing the accumulated balance in the account when it gets too large.

10

Defined benefit plan

A pension plan which defines the benefits that the employee will receive at the time of retirement.

11

Defined contribution plan

A pension plan where the employer agrees to contribute to a pension trust a certain sum each period based on a formula.

12

Employer's pension obligation

The deferred compensation obligation the employer has to its employees for their service under the terms of the pension plan.

13

Expected Postretirement Benefit Obligation (EPBO)

The actuarial present value as of a particular date of all benefits expected to be paid after retirement to employees and their dependents.

14

Funded pension plan

A pension plan where the employer (company) sets funds aside for future pension benefits by making payments to a funding agency that is responsible for accumulating the assets of the pension fund and for making payments to the recipients as the benefits become due.

15

Interest on the liability

The interest expense which accrues each year on the projected benefit obligation.

16

Multiemployer pension plans

Pension plans sponsored by two or more different employers.

17

Noncapitalization approach

The approach for recording pension plans off the balance sheet.

18

Noncontributory pension plan

A pension plan where the employer bears the entire cost.

19

Pension Benefit Guaranty Corporation

A corporation created by ERISA who’s purpose is to administer terminated pension plans and impose liens on the employer’s assets for certain unfunded pension liabilities.

20

Pension plan

An arrangement whereby an employer provides benefits (payments) to employees after they retire for services they provided while employed.

21

Pension plan gain or loss

The difference between the actual return and the expected return on plan assets and amortization of the unrecognized net gain or loss from previous periods.

22

Projected benefit obligation

The employer’s pension obligation that is computed using the deferred compensation amount on all years of service performed by employees under the plan⎯both vested and nonvested⎯using future salaries.

23

Qualified pension plan

A pension plan in accordance with federal income tax requirements that permits deductibility of the employer’s contributions to the pension fund and tax-free status of earnings from pension fund assets.

24

Service cost

The expense caused by the increase in pension benefits payable (the projected benefit obligation) to employees because of their services rendered during the current year.

25

Vested benefits

Benefits that the employee is entitled to receive even if the employee renders no additional services under the plan.

26

Vested benefit obligation

The employer’s pension obligation that is computed using current salary levels and includes only vested benefits.