Year 0 On December 31, 2010, Arrieta Incorporated purchases a subsidiary of Sales Unlimited. Sales has a defined benefit pension plan. The actuary provides you the following information: 12/31/2010 (000s) Statement of financial position Benefit obligation Fair value of plan assets Funded status 12/31/2010 Expected impact of plan alignment 2,700 2,600 (100) 360 The initial amount (in 000s) to be recognized on the books of Arrieta for initial recognition of the funded status of the Sales pension plan is: Benefit obligation 2,700 Fair value of plan assets Funded status 12/31/2010 2,600 (100) Year 1 On July 1, 2011 Arrieta amends the plan to align the benefits with its own plans, retroactive to the date of employment for the acquired employees. The retroactive benefits result in a prior service cost. The remaining service lives of those employees (average time to retirement) is 12 years. The actuary presents you with the following information (in 000s) as of 12/31/2011 Service cost 100 105 Interest cost Expected return on plan assets 182 Actuarial gain/(loss) 20 Plan amendment 360 Actual return on plan assets 150 Benefits paid (75) Employer contributions 35 1/1/2011 12/31/2011 Discount rate 3.75% 4.00% 7.00% 7.00% Expected return Salary increases 4.00% 4.00% Year 2 In year two, there are no amendments to the plan, but it was a dismal year for investments. However, the actuary informs you that an actuarial change has been made related to expected mortality. It may now be necessary to amortize excess actuarial losses. The actuary informs you that the average remaining service lives of current active plan participants is 10 years. The actuary provides you with the following information (in 000s) Service cost 110 Interest cost 127 Expected return on plan assets Actuarial gain/(loss) 190 (80) Plan amendment 0 (250) Actual return on plan assets Benefits paid (88) Employer contributions 50 1/1/2012 12/31/2012 Discount rate 4.00% 4.00% 7.00% 7.00% Expected return Salary increases 4.00% 4.00% Required (11 pts): a) Prepare the disclosure for the change in plan obligation and the change in plan assets for the year and determine the ending funded status. b) Prepare the disclosure for the net period benefit cost (i.e., pension expense) for the period. c) Determine the amount of any amortization of gains and losses for the following year. Year 0 On December 31, 2010, Arrieta Incorporated purchases a subsidiary of Sales Unlimited. Sales has a defined benefit pension plan. The actuary provides you the following information: 12/31/2010 (000s) Statement of financial position Benefit obligation Fair value of plan assets Funded status 12/31/2010 Expected impact of plan alignment 2,700 2,600 (100) 360 The initial amount (in 000s) to be recognized on the books of Arrieta for initial recognition of the funded status of the Sales pension plan is: Benefit obligation 2,700 Fair value of plan assets Funded status 12/31/2010 2,600 (100) Year 1 On July 1, 2011 Arrieta amends the plan to align the benefits with its own plans, retroactive to the date of employment for the acquired employees. The retroactive benefits result in a prior service cost. The remaining service lives of those employees (average time to retirement) is 12 years. The actuary presents you with the following information (in 000s) as of 12/31/2011 Service cost 100 105 Interest cost Expected return on plan assets 182 Actuarial gain/(loss) 20 Plan amendment 360 Actual return on plan assets 150 Benefits paid (75) Employer contributions 35 1/1/2011 12/31/2011 Discount rate 3.75% 4.00% 7.00% 7.00% Expected return Salary increases 4.00% 4.00% Year 2 In year two, there are no amendments to the plan, but it was a dismal year for investments. However, the actuary informs you that an actuarial change has been made related to expected mortality. It may now be necessary to amortize excess actuarial losses. The actuary informs you that the average remaining service lives of current active plan participants is 10 years. The actuary provides you with the following information (in 000s) Service cost 110 Interest cost 127 Expected return on plan assets Actuarial gain/(loss) 190 (80) Plan amendment 0 (250) Actual return on plan assets Benefits paid (88) Employer contributions 50 1/1/2012 12/31/2012 Discount rate 4.00% 4.00% 7.00% 7.00% Expected return Salary increases 4.00% 4.00% Required (11 pts): a) Prepare the disclosure for the change in plan obligation and the change in plan assets for the year and determine the ending funded status. b) Prepare the disclosure for the net period benefit cost (i.e., pension expense) for the period. c) Determine the amount of any amortization of gains and losses for the following year
