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Accounting Webster's Timeline History, 1998 - 1999 by Icon Group International (Jun 6, 2009)_6

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Tham khảo tài liệu 'accounting webster's timeline history, 1998 - 1999 by icon group international (jun 6, 2009)_6', tài chính - ngân hàng, tài chính doanh nghiệp phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | 106 Critical Financial Accounting Problems ized changes in the fair market value of the plan assets. It is computed as follows ARPA FVPAE - C B - FVPAB where ARPA Actual return on plan assets. FVPAE Fair value of plan assets at the end of the period C Contributions to plan during the period B Benefits paid during the period FVPAB Fair value of plan assets at the beginning of the period To illustrate let s assume that the actual return on plan assets in 1996 for the Valentine Company is 20 000. Entry 3 in Exhibit 5.1 records the actual return as a credit or decrease in annual pension expense and a debit or increase in plan assets. Amortization of Unrecognized Prior Service Cost As discussed earlier an amendment to the plan may grant retroactive benefits to employee services rendered in periods prior to the amendment. The unrecognized prior service cost is to be recognized as an off-balance-sheet account. These retroactive benefits are to be recognized as pension expense only during the remaining service life of the covered active employees. Therefore two entries are necessary 1 An entry to recognize in the memo record the increase in the projected benefit obligation and the unrecognized prior service cost at the date of the amendment 2 an entry to recognize in the journal as an increase in pension expense and a decrease in unrecognized prior service cost the amortization of unrecognized prior service cost. The amortization method favored by the FASB is the years-of-service amortization method which is similar to the units-of-production computation. The years-of-service amortization method consists of 1 Determining the total number of service years in the remaining service life of the covered active employees 2 obtaining the cost per service year by dividing the unrecognized prior service cost by the total number of service years and 3 computing the annual amortization charge by multiplying the cost per service year by the number of service years used per year. To .