14–55
+ Contributions
150.00
– Pension Benefits Paid at end of Year
(350.00)
= Dec 31 2013 / Jan 1 2014 PBO Balance
$4,160.00
[$978.80 actuarial loss – $665.00 corridor] / 25 years = $12.55
So, the “cost” of the aggressive accounting scheme is that 2014 pension expense
14–56
C14-1. GE Corporation: Interpreting OPEB disclosures (LO 6, 7)
Requirement 1:
(in millions)
1
DR Retiree benefit plans cost
$637
CR Retiree health plans – due after one year
$637
To record first three components of expense
2
DR Retiree benefit plans cost
550
CR OCI – Net actuarial loss (gain)
518
CR OCI – Prior service cost
32
To record amortization components
3
DR Retiree health plans – due after one year
832
CR OCI – Prior service cost
832
To record plan amendment
4
DR Retiree health plans – due after one year
548
CR Cash
548
To record employer contribution
5
DR Retiree health plans – due after one year
25
CR OCI – Net actuarial loss (gain)
25
To record difference between actual and expected return
6
DR OCI – Net actuarial loss (gain)
60
CR Retiree health plans – due after one year
60
To record PBO actuarial loss (gain)
7
DR Retiree health plans – due after one year
366
DR Curtailment/settlement loss (given)
32
CR Retiree benefit plans cost
101
CR OCI – Prior service cost (given)
195
CR OCI – Net actuarial loss (gain) (given)
102
14–57
8
DR Retiree health plans – due within one year
13
DR Retiree life plans
126
CR Retiree health plans – due after one year
139
To reclassify between long-term and short-term health obligations and life
insurance obligations
credits to OCI – Prior service cost and OCI – Net actuarial loss (gain) and the
debit to a Curtailment/settlement loss. We determined the credits by backing
into the 2012 changes in the AOCI – Past service cost and AOCI – Net
actuarial loss (gain). We then needed the Curtailment loss to balance the
entry. The Retiree benefit plans cost of $1,086 comes entries 1, 2, and 7
of $13 and $126 to Retiree health plans – due within one year and Retiree life
plans, respectively.
Retiree health plans –
due after one year
January 1, 2012
$9,684
1
Retiree benefit plans cost
637
3
Plan amendment
$832
3
Employer contribution
548
4
Actual less expected
25
5
PBO actuarial gain
60
7
Curtailment/settlement
366
$8,490
8
Reclassification (plug)
139
December 31, 2012
$8,629
Retiree health plans –
14–58
due within one year
January 1, 2012
$602
8
Reclassification (plug)
13
December 31, 2012
$589
Retiree life plans
January 1, 2012
$1,766
8
Reclassification (plug)
126
December 31, 2012
$1,640
Requirement 2:
Presented below are t-accounts for OCI – prior service cost and OCI –
actuarial (gain) loss.
OCI –
prior service cost
Amortization
$518
Amendment
832
Curtailment
195
$1,545
OCI –
actuarial (gain) loss
Amortization
$32
Actual less expected
25
PBO gain
60
Curtailment
102
$219
The credits to OCI – prior service cost decreases GE’s AOCI – prior service cost
from a $2,901 debit balance to a $1,356 debit balance. The credits to OCI –
actuarial (gain) loss reduces the AOCI – Net actuarial loss from $401 to $182.
14–59
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
accumulated other comprehensive income would be shown net of tax in the
statement of comprehensive income and balance sheet.
C 14-2. Novartis: Interpreting IFRS pension accounting (LO 3, 6, 9)
Requirement 1:
The adoption of IAS 19 (R) increased Novartis’ annual pension expense in part
because Novartis can no longer subtract the “higher long-term expected return on
14–60
C 14-3. Union Pacific Corporation: Interpreting pension and OPEB footnote
disclosures (LO 3, 6, 7)
$(729), which represents the liability for underfunding. Under U.S. GAAP, this
amount would be shown as a liability on Union Pacific’s balance sheet.
Requirement 2 – Analysis of AOCI – Actuarial (Gains) Losses for pensions
Beginning 158$
Amortization 10$
(from expense schedule)
Asset loss 744
PBO 132
(from PBO reconciliation)
Ending 1,024$
Accumulated Other Comprehensive
Income – Actuarial (Gains) Losses (Pension
(Actual return of
$(592) less Expected
return of $152)
Requirement 4 – Short-term risk ratios
Market Cap = Stock price of $47.80 x 503.2 million shares
= $24,053
ST Pension
PBO – PA
=
$729
=
0.031
Mkt Cap
$24,053
ST OPEB
5yr – PA
=
$11,048
=
0.640
(Extended)
Mkt Cap
$24,053
Mkt Cap
$24,053
LT OPEB
=
$418
=
0.0174
Mkt Cap
$24,053
14–62
C 14-4. Union Pacific Corporation: Comparing U.S. GAAP and IFRS pension
and OPEB accounting (LO 9)
1. Union Pacific would still recognize its actuarial losses in OCI/AOCI and record
a liability on the balance sheet. However, the actuarial losses are not
2. The effects of new amendments would be recognized as an increase to
pension expense. If we look at the OPEB plans for 2008, $9 decrease to the
3. The expected return would be computed using the discount rate. If the
contributions and payments were made evenly during the year, then the base
$(592) and this recomputed expected return of $136.3 equals $728.3. This
$136.3 expected return, or $0.7, would be shown as a financing component.
The amortization components would no longer be part of pension expense. As