Problem 3: (10 points) Refer to the 2014 pension disclosures for PepsiCo, Inc. and The Coca-Cola Company. Required: (1) Do the companies offer defined benefit plan, defined contribution pension plan, or both? Who (employees or companies) bear the risk with each plan? Defined benefit plan, defined contribution plan or both? Who bears the risk? PepsiCo, Inc. The Coca-Cola Company (2) Were these companies defined benefit pension plans over-funded or under-funded in 2014? By how much? Underfunded or overfunded? By how much? PepsiCo, Inc. The Coca-Cola Company (3) Do these companies report asset or liability related to their pension plans in their balance sheet at the end of 2014? What are the amounts that are reported in their balance sheets? Report on balance sheet as asset or liability? By how much? PepsiCo, Inc. The Coca-Cola Company (4) List the two companies actuarial assumptions regarding (1) discount rate and (2) future rate of salary increases used to determine projected benefit obligations (PBO) in 2014. Actuarial assumptions on Discount rate Actuarial assumptions on Future salary scale PepsiCo, Inc. The Coca-Cola Company (5) Discuss the effects of the above actuarial assumptions on discount rate and future salary scale that Coca-Cola Company has made relative to PepsiCo on projected benefit obligations (PBO) in 2014. Impact on Projected Benefit Obligations (PBO) in 2014 Actuarial assumptions on discount rates Actuarial assumptions on future salary scales (6) Refer to your discussion in (5). Overall, which company do you think has the most conservative set of assumptions in 2014? Why? (7) If Coca-Cola Company had closed down on December 31, 2014, is the amount that the company would have been obliged to pay its employees on account of pensions greater than, equal to, or less than PBO?

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