Sears Canada Inc, offers Canadian consumers a diverse array of shopping options, with departiner and specialty stores, a comprehensive website, and a broad range of home-related services. At December 31, 2009, Sears had approximately 35,000 associates (or employees) helping customers through their personal shopping and catalogue ordering. The company's annual report for 2009 included the following information: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. Associate Future Benefits In July 2008, the Company amended its pension plan and introduced a defined contribution component. The defined benefit corriponent continues to accrue benefits related to future compensation increases although no further service credit is earned.... The Company currently maintains a defined benefit registered pension plan and a defined contribution registered pension plan, which covers some of its regular full-time associates as well as some of its part-time associates. The defined benefit plan provides pensions based on length of service and final average earnings.... Source: Sears Canada Annual Report 2009. The company's statements of financial position at December 31, 2009 and 2008, include the following information (in millions of dollars):

In addition, a note to the company's financial statements shows that Sears had unfunded benefit obligations of \(\$ 223.4\) million at December 31,2009 , and a funding surplus of \(\$ 107.2\) million at December 31, 2008.
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1. Compare and contrast defined benefit and defined contribution pension plans.
2. What change did Sears introduce to its employee retirement program? What is the main reason for this change? Explain.
3. Compute and interpret the financial leverage ratio for 2009.
4. Assume that the unfunded benefit obligation at December 31, 2009, was reported on Sears's statement of financial position as a non-current liability with an equal decrease in shareholders' equity, and the surplus funding at December 31, 2008, was reported as a non-current asset with an equal increase in shareholders' equity. Compute the financial leverage ratio by using the adjusted statement of financial position amounts. Do you think Sears's management would favour the reporting of the unfunded benefit obligation on the company's statement of financial position? Explain.

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2009 Total assets $3,404.8 Shareholders' equity 1,657.5 Accrued benefit asset (liability) 167.7 2008 $3,237.3 1,483.2 158.5