Chapter 3 describes accounting analysis of financing activities - both creditor and equity financing. The main contents of this chapter include all of the following: Postretirement benefits, determining future annual benefit cost, impact on plan expense, change in actuarial assumptions,. | Financial Statement Analysis . Subramanyam Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Analyzing Financing Activities 3 CHAPTER Pensions Pension Overview Postretirement Benefits Defined Pension Plan -- Employer-promises monetary benefits to employees after retirement, ., monthly stipend until death. Defined Contribution Plan – Plan specify the amount of pension contribution that the employer makes to the plan. Two kinds of Retirement Plans Post Retirement Benefits Who are the three “Parties” to a pension plan? Postretirement Benefits Elements of the Pension Process Employer Investment and returns Benefits (Disbursements) Contributions Pension Fund Employee Post Retirement Benefits How does a company determine the annual cost of a defined contribution plan compared to a defined benefit plan? Post Retirement Benefits How does a company determine the annual cost of a defined contribution pension plan? Post Retirement Benefits Most common type of defined contribution pension plan is a 401-K. Post Retirement Benefits How does a company determine the annual cost of a defined benefit pension plan? Post Retirement Benefits Three steps: Determine how much is the annual benefit and for how many years. Determine the PV of the above payments. Determine how many years to “spread” the cost. Postretirement Benefits Illustration of Pension Accumulation and Disbursement for a Defined Benefits Plan Funds required at employees’ retirement: Present value of 10 payments of $20,000 per annum with a discount rate of 8% per annum $134,200 Annual payments into the Fund required to accumulate to $134,200 in 15 years with a discount rate of 8%per annum 10 years Annual benefits of $20,000 paid to employee for 10 years Postretirement Preretirement Retirement Benefits = $20,000 per annum Contributions = $4,942 per annum 15 years Step 1 Determining Future Annual . | Financial Statement Analysis . Subramanyam Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Analyzing Financing Activities 3 CHAPTER Pensions Pension Overview Postretirement Benefits Defined Pension Plan -- Employer-promises monetary benefits to employees after retirement, ., monthly stipend until death. Defined Contribution Plan – Plan specify the amount of pension contribution that the employer makes to the plan. Two kinds of Retirement Plans Post Retirement Benefits Who are the three “Parties” to a pension plan? Postretirement Benefits Elements of the Pension Process Employer Investment and returns Benefits (Disbursements) Contributions Pension Fund Employee Post Retirement Benefits How does a company determine the annual cost of a defined contribution plan compared to a defined benefit plan? Post Retirement Benefits How does a company determine the annual cost of a .
