TheAliMan Wrote: ------------------------------------------------------- > TheAliMan Wrote: > -------------------------------------------------- > ----- > > Sorry, I actually opened up my page to that > part. > > > > Pension expenses aren’t allowed to be deducted > in > > tax statements, that explains the decrease in > DTL > > (or increase in DTA). > > > > At the bottom it says that SFAS No. 158 (the > new > > standards) were implemented in the most recent > > balance sheet, however this provision wasn’t > > adopted in prior balance sheets. Therefore make > > pension adjustments to prior balance sheets. 2 quick questions on this post. 1. I don’t have book 2 with me today, but when you say “at the bottom it says…” are you referring to the problem on page 276? 2. Is SFAS 158 the one that says that pension asset/liability should be the same as funded status? If the answer is yes to both questions, then I think we have figured it out----> SS 6 describes new standards where pension asset/liabilty are the same, problem on page 276 talks about old standards and thats why the adjustments are made, and we prob wont see this on the exam since it relates to old standards.
pepp Wrote: ------------------------------------------------------- > I’ve read this pension thingy twice in the last 2 > days and i am so confused i can’t tell. > The only thing I understand so far is this: > > Balance sheet only reports net (ie. plan assets - > PBO), if its negative its underfunded and a > liability, if its positive then its overfunded and > an asset and this is also called the funded > status. So I have to agree, I don’t see any reason > for any adjustment because if we follow this > funded status, then we are always keeping it > current. > ive seen q bank questions where theyre not netted—pension asset and pension liabilty are both on the B/S…so who the hell knows. > I am really confused. Someone guide pls.
funded status != net pension asset/ liability to make it simple, think of pre dec 2006 gaap acounding and post dec 2006 gaap acounting the pre dec 2006 requires you to report funded status AFTER adjusting for accurals. the example of schweser notes would help.
I don’t see any reason for Balance sheet to report an asset and a liability. As analysts we are only interested in the net position. Reporting as Assets and Liabilities has the effect or Lowering ROE and increasing Leverage artificially, which is why companies only report net.
kitty, you mean A - L not A/L right
the “!=” in dkitty’s response means not equal to A/L.
^ This only means that Killy is a Java/J2EE programmer! Join the Club bro!
Ok, keeping on the topic here, dkitty, i stand by what I mentioned earlier Balance sheet only reports net (ie. plan assets - PBO), if its negative its underfunded and a liability, if its positive then its overfunded and an asset and this is also called the funded status. If you don’t believe me you can check out pg 84 Balance sheet section, or Pg 103 Underlying Economic liability/asset section.
Another thing to note is, that with new SFAS 158, as balance sheet is always kept current ---- NO ADJUSTMENTS ARE REQUIRED!!!
pepp Wrote: ------------------------------------------------------- > Another thing to note is, that with new SFAS 158, > as balance sheet is always kept current ---- NO > ADJUSTMENTS ARE REQUIRED!!! THIS. > > However, its good to do adjustments for > CFO/CFI/CFF. This of course conflicts with the problem in book 2 pg 276, where you are told to adjust the pension asset to make it equal to the funded status. Arer we goign to assume that this is not done anymore and this problem is one that Schweser is using from before the new SFAS 158?
The show NY, I don’t which book you are following, but from the CFAI text on Pension chapter, I don’t see any example or LOS where they ask us to do a reconcilation of economic funded status ± unrecognized items = balance sheet reported asset/liability. Under the new GAAP all is already adjusted. There is no such thing as Minimum Allowance Liability either. Neither is there a concept of unrecognized items. I think the scehwer problem that you are doing may be leading you to the wrong path. Be cautious.
the problem im referring to is on pg 276 in schweser book 2. also, if theres no such thing as min allowance liabilty does that mean it is not going to be an element of OCI either?
That’s correct, quoting from pg 85: AML; a concept that will no longer be relevant for US GAAP after the adoption of SFAS 158. So basically if you are given a balance sheet for a company prior to 2006, you’ll have essentially adjust the balance sheet to figure out the TRUE FUNDED STATUS as opposed to balance sheet reported laiablity/asset. So summarize: AML / unrecognized costs and adjustments to determine TRUE FUNDED STATUS etc are ONLY VALID for prior than 2006 balance sheet AND FOR IFRS companies. any US company that has reported after 2006, was REQUIRED to reconcile their balance sheet figure with the true funded status and eliminate the AML. and to be honest i dont know if we are made to learn about rules that are not even affecting current US gaap balance sheet!!! what is cfai smoking?
we still have to know how to make the ad justments though since we could be given an ifrs balance sheet on the exam