PENSION ACCOUNTING (CASE 2) You are the Accounting Director for a medium size Chemical Company and one of your responsibilities is accounting for the Companys defined benefit pension plan. The preliminary Plan Status as of December 31, 2014 was as follows: $ in Millions Projected Benefit Obligation $(100) Plan Assets at Fair Value 100 Funded Status -0- Early in 2015, the Chief Financial Officer calls you into his office and tells you he just had a conversation with the actuary and the final Plan asset valuation for 2014 is only $85 million because of the poor stock market performance. The actuary also told the CFO that the $15 million loss would not affect the 2014 externally reported income statement but would certainly affect earnings in 2015 and in future years as well. The CFOs question to you is - will the whole $15 million need to be recognized against 2015s income or can it be spread over future periods? He also tells you he is a little confused as to how the FASB 87 rules work and would like an overall presentation on pension accounting as well as how the $15 million will impact current and future income. Prepare a research paper on how the pension accounting rules work as well as how the $15 million actuarial loss will be accounted for. A recap of how the pension accounting rules work? What are the components of the reported pension expense and how are those numbers derived? How are differences between what is included in the Plan Status and what is reported in the Financial Statements reconciled ? How will the $15 million be recognized according to FASB 87 accounting rules? What amount of pension liability or asset must be reported in the Financial Statements? How does Other Comprehensive Income fit into the reported pension numbers