CPA F-7

What is a required statment of both defined benefit pension plans and defined contribution pension plans?

-Statement of changes in Net Assets Available for Benefits and -Statement of changes in Net Assets AVAILABLE for Benefits and Statement of CHANGES in Net Assets available for Benefits Defined benefit plans also required to prepare statments of accumulated plan benefits and statment of changes in accumulated plan benefits For both, the statement of cash flows is optional, but not required. There is no pension plan financial statement called a "statement of net funded status"

How to calculate for year end pension liability and when to report?

-You report a pension plan liability if there is a negative funded status (FV of plan asset < PBO) -PBO should be calculated at year end and is affected by prior service cost (which would increase PBO). -Calc: FV Plan Asset - PBO = Pension plan liability balance

What are the two required financial statements of a defined contribution retirement plan?

1. A Statement of net assets available for benefits of the plan 2. A statement of changes in net assets available for benefits

What are some things that a Defined Benefit Plan should disclose in a FS?

1. The funded status of the plan 2. The amount of net periodic pension cost for the period 3. The fair value of the plan asset

How should plan investments be reported in a defined benefit plan's financial statements?

At Fair Value Explanation: Pension plan investment assets must be reported at fair value in a defined benefit plan's financial statements.

What are components are included in OCI under U.S. GAAP?

Changes in the funded status of a: - pension plan due to gains/losses, -prior service cost, and -net transition assets/obligations. These are recognized in OCI, Net of tax, in the period incurred and are reported as components of accumulated OCI on the balance sheet until recognized in net periodic pension cost through amortization

Which of the following financial instruments issued by a public company should be reported on the issuers books as a liability on the date of issuance?

Common stock that contains an unconditional redemption feature. Explanation: Common stock that contains an unconditional redemption feature should be reported on the issuers books as a liability on the date of issuance because there is an obligation of a cash outflow in the future that the company has no ability to prevent.

On which of the following dates is a public entity required to measure the cost of employee services in exchange for an award of equity interests, based on the fair market value of the award?

Date of grant Explanation: equity instruments issued for employee services are to be valued at the date of the grant

An employers obligation for postretirement health benefits that are expected to be provided to or for an employee must be FULLY ACCRUED by the date the:

Employee is fully eligible for benefits Explantion: Postretirement health benefits are accrued in a manner similar to pension benefits. The expected postretirement health benefits must be fully accrued by the date the employee is fully eligible for the benefits. The accrual will begin when the employee is hired through the eligibility (vesting) date.

In the financial statements of employee benefit pension plans and trusts, the plan investments must be reported at:

Fair value

Gains and losses on the purchase and resale of treasury stock are reflected in:

Gains on treasury stock transactions increase paid in capital, while losses on treasury stock transactions decrease existing paid in capital from treasury stocks transactions to zero and then decrease retained earnings. Common stock and income statement accounts are never used.

Interest cost included in the net periodic pension cost recognized for by an employer sponsoring a defined benefit pension plan represents the:

Increase in the projected benefit obligation due to the passage of time. Calc: Beginning of period PBO X Discount rate =Interest cost

When a property dividned is declared and the market value of the property exceeds its book value, the excess:

Increases net income for the period explanation: A property dividend is recorded at the fair value of the property to be distributed. The property has to be adjusted to fair value with the adjustment affecting earnings for the period. Additional paid in capital in not affected.

What should happen when the purpose of the appropriation has been achieved?

It should be restored to unapprioriated retained earnings

a property dividend should be recorded in retained earnings at the property's:

Market value at the date of declaration

An overfunded single-employer defined benefit postretirement plan should be recognized in a classified statement of financial position as a:

Noncurrent asset -Over funded pension plans represent that the FV of the plan assets is greater than the projected benefit obligation - These are reported as a noncurrent asset for balance sheet reporting purposes

Under IFRS, remeasurements of the defined benefit liability(asset), including remeasurements from actuarial gains are reported in...

Other comprehensive income and are NOT reclassified (amortized) to the income statement.

Company has an underfunded defined benefit pension plan. during the current year, the company uses the years-of-service method to amortize its prior service cost. What effect will the amortization of prior service cost have on the company's current-year financial statements?

Other comprehensive income will be increased. Explanation: using the years-of-service method will result in amortizing the prior service cost to net periodic pension cost over the remaining service period of employees expected to receive benefits under the pension plan. the credit would be other comprehensive income which increases the account. Dr. Net periodic pension cost (AGE) Cr. Other comprehensive income

What is a cost that is unique to postretirmeent health-care benefits?

Per capita claims

Visor co. Maintains a defined benefit pension plan for its employees. under U.S. GAAP, the service cost component of visors net periodic pension cost is measured using the:

Projected benefit obligation. Explanation: Service cost represents the increase in the projected benefit obligation resulting from employees services rendered during the year.

A reatained earnings "appropriation can be used to:

Restrict earnings available for dividends. Its disclose to shareholders that some of the RE are not available to pay dividends because they have been restricted for legal or contractual reasons or discretionary act of managmnet (they decided) for specific contingency purposes. Rule: a retained earnings appropriation debits (reduced) "unappropriated retained earnings" and sets up (credits) "appropriated retained earnings." It does not affect the income statement.

Reporting defined pension plans statment of changes in accumulated plan benefits.

The statement of changes in accumulated plan benefits shows the impact of every factor that caused a change in a plan's actuarial assumptions, the effect of plan amendments, and the amount of benefits paid to beneficiairies. However, the appreciation of a plans assets would have no effect on the plan's actuarial present value of plan benefits and would thus not be included on the statement of changes in accumulated plan benefits

Where should the funded status of a defined benefit pension plan be reported?

The statement of financial positions (as an asset or liability (or both)) Explanation: Funded status = FV of plan assets - the projected benefit obligation

How should Harmony report a LIABILITY related to the defined benefit pension plan?

The unfunded projected benefit obligation. Explanation: A liability on the balance sheet represents the incremental (or unfunded) portion of the projected benefit obligation that exceeds plan assets

Under the IFRS, how do they treat remeasurement of the net defined liability?

They are treated under other comprehensive income.

What should be reported on the balance sheet under accumulated other comprehensive income related to pensions plans under U.S. GAAP?

Under GAAP, Unrecognized prior service cost, unrecognized transition obligations, and unrecognized net gains or losses must be reported in accumulated OCI until they are recognized as a component of the net periodic pension cost (through Amortization). -Unrecognized prior service cost, unrecognized transition obligations, and unrecognized net losses ALL increase net periodic pension cost when recognized and are therefore recorded as a debt to accumulated OCI. -Unrecognized transition assets and net gains decrease net periodic pension cost when recognized and are therefore recorded as a credit to accumulated OCI.

If a cash dividend was declared and payable on a certain date what happens?

Working capital is decreased on the date of declaration. The liability for a cash dividend is incurred and recorded on the date of declaration.

a company in year 10 gave a single employee a defined benefit pension plan by granting increased benefit for services that were provided before year 10. Under the IFRS, the past cost should be reflected un the financial statements for:

Year 10 only! Explanation***: Under IFRS past service cost is recognized on the income statement in the period of the plan amendment.

How should a small stock dividend be treated?

by transferring the FMV of the stock dividend at declaration date from retained earnings to capital stock and paid -in capital. There is no effect on total shareholders equity because all transfers take place within shareholders equity.

When do dividends become a liability?

date of declaration