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Chapter 20: Question 29Q (page 1161)

What is the difference between the APBO and the EPBO? What are the components of post-retirement expense?

Short Answer

Expert verified

APBO and EPBOare two termsrelated to an organization's pension plan.Both terms determine thepresent value of the total pension expenseusing thetime value of money.

Step by step solution

01

Difference between APBO and EPBO

EPBO, i.e., Expected post-retirement benefit obligation, defines the present value of the future pension benefit that an organization will pay an employee on a particular date.

APBO, i.e., Accumulated post-retirement benefit obligation, defines the collection of the pension amounts of an employee till the future date that the organization will pay.

02

Components of post-retirement expense

  1. Service cost
  2. Actual return on plan assets
  3. Interest cost
  4. Amortization of prior service cost
  5. Gain or loss

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Most popular questions from this chapter

What factors must be considered by the actuary in measuring the amount of pension benefits under a defined benefit plan?

The following items appear on Brueggen Company’s financial statements. 1. Under the caption Assets: Pension asset/liability. 2. Under the caption Liabilities: Pension asset/liability. 3. Under the caption Stockholders’ Equity: Prior service cost as a component of Accumulated Other Comprehensive Income. 4. On the income statement: Pension expense. Instructions Explain the significance of each of the items above on corporate financial statements. (Note: All items set forth above are not necessarily to be found on the statements of a single company.)

Question: What is meant by “past service cost”? When is past service cost recognized as pension expense?

At the end of the current year, Joshua Co. has a defined benefit obligation of \(335,000 and pension plan assets with a fair value of \)345,000. The amount of the vested benefits for the plan is \(225,000. Joshua has a liability gain of \)8,300 (beginning accumulated OCI is zero). What amount and account(s) related to its pension plan will be reported on the company’s statement of financial position?

Differentiate between “accounting for the employer” and “accounting for the pension fund.”
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