Podcast
Questions and Answers
What components make up the calculation of PBO at the end of the period?
What components make up the calculation of PBO at the end of the period?
- PBO beginning + service costs + interest - benefits paid + or - actuarial losses or gains (correct)
- PBO beginning + investment returns - service costs + benefits paid
- PBO beginning + service costs + contributions - benefits paid
- PBO beginning + actual return + actuarial gains - benefits paid
Which formula correctly represents the components of the pension fund at the end of the period?
Which formula correctly represents the components of the pension fund at the end of the period?
- Fund beginning + contributions + actual return - benefits paid (correct)
- Fund beginning + actuarial losses + contributions - benefits paid
- Fund beginning + expected return - contributions + benefits paid
- Fund beginning + service costs - contributions + actual return
Which of the following is NOT included in the calculation of pension expense?
Which of the following is NOT included in the calculation of pension expense?
- Actual return (correct)
- Service cost
- Interest
- Amortization of prior service cost
Which element is added to calculate the pension expense?
Which element is added to calculate the pension expense?
What is subtracted from the pension expense calculation?
What is subtracted from the pension expense calculation?
Flashcards
What is the projected benefit obligation (PBO)?
What is the projected benefit obligation (PBO)?
The projected benefit obligation (PBO) represents the estimated total amount of future benefits an employer expects to pay to retirees based on their current and past service.
How does the PBO change over time?
How does the PBO change over time?
The change in PBO over a period is calculated by adding the beginning PBO to the service cost, interest cost, and actuarial losses or gains, and then subtracting the benefits paid.
What is the Pension Fund?
What is the Pension Fund?
The pension fund represents the assets held by an employer to fund future pension payments to retirees.
How does the pension fund change over time?
How does the pension fund change over time?
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What is Pension Expense?
What is Pension Expense?
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Study Notes
Pension Benefit Obligation (PBO) Calculation
- PBO is calculated as: Beginning PBO + Service Costs + Interest - Benefits Paid ± Actuarial Losses/Gains = Ending PBO
Pension Fund Calculation
- Pension Fund is calculated as: Beginning Fund Balance + Contributions + Actual Return - Benefits Paid = Ending Fund Balance
Pension Expense Calculation
- Pension Expense is calculated as: Service Cost + Interest - Expected Return + Amortization of Prior Service Cost ± Amortization of Unrecognized Losses/Gains
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Description
Explore the key calculations in pension accounting, including the Pension Benefit Obligation (PBO), Pension Fund, and Pension Expense. Understand how each component contributes to the overall financial understanding of pension plans. This quiz is ideal for finance students or professionals looking to test their knowledge on pension calculations.
