F6: Notecards (General)

Question 1

Cost of retiree health and other post retirement (and post employment!) benefits must be accrued IF: (4 things)

Answer 1

1- obligation is attributable to services already rendered
2- employee’s rights accumulate or vest
3- payment is probable
4- amount of benefits can be reasonably estimated

Question 2

APBO

Answer 2

Accumulated Postretirement Benefit Obligation

• PV of future benefits that have vested as of the measurement date
• Discounted at an assumed discount rate

Question 3

EPBO

Answer 3

Expected Postretirement Benefit Obligation

-PV of future benefits expected to be paid as of the measurement date

Question 4

EPBO includes (2 things)

Answer 4

1- APBO plus

2- PV of expected future benefits not yet vested

Question 5

How to account for postretirement benefits other than pensions in the Income Statement:

Answer 5

Benefit-years-of-service approach is used

Question 6

Transition to accrual accounting done in one of two ways for postretirement benefits other than pensions:

Answer 6

1- Immediately expense as the effect of a change in accounting principle
2- Delayed recognition using straight-line amortization over 20 years

Question 7

How to account for postretirement benefits other than pensions in the Balance Sheet:

Answer 7

Funded Status =

FV of plan assets
- APBO
= Funded status

Question 8

Postemployement Benefits definition

Answer 8

Benefits paid to employees after their employment but before retirement

-NOT the same as post retirement benefits

Question 9

Examples of post employment benefits

Answer 9

• Salary continuation
• Severance benefits
• Continuation of other fringe benefits (insurance)
• Job training
• Disability related stuff (workers comp)

Question 10

2 types of deferred compensation and how accounted for

Answer 10

1- pension
2- post retirement plans

accrual basis

Question 11

When to accrue for compensation for future absences (sick and pto)

Answer 11

Accrued in the year earned if ALL met:

• attributable to services already rendered
• obligation relates to rights that vest OR accumulate
• payment is probable
• amount is reasonably estimated

Question 12

When to accrue for sick pay

Answer 12

ONLY if vesting