Year o 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 2,750 Benefit obligation 2,650 Fair value of plan assets -100 Funded status 12/31/2010 360 Expected impact of plan alignment The initial amount to be recognized on the books of Arrieta for initial recognition of the funded status of the Sales pension plan is: Benefit obligation Fair value of plan assets Funded status 12/31/2010 2,750 2,650 (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 as of 12/31/2011 Service cost Interest cost Expected return on plan assets Actuarial gain/(loss) Plan amendment Actual return on plan assets Benefits paid Employer contributions 110 115 182 20 360 150 (75) 35 Discount rate Expected return Salary increases 1/1/2011 12/31/2011 3.75% 4.00% 7.00% 7.00% 4.00% 4.00% Required: 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) Describe how you will account for prior service costs (i.e. which accounts will be affected on the balance sheet and by how much). Provide ASC references to support the accounting for the prior service cost. d) Determine the amount of any amortization of gains and losses for the following year. Provide ASC references to support the calculation. 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. 115 130 | 190 (80) Service cost Interest cost Expected return on plan assets Actuarial gain/(loss) Plan amendment Actual return on plan assets Benefits paid Employer contributions (250) (88) 50 Discount rate Expected return Salary increases 1/1/2012 4.00% 7.00% 4.00% 12/31/2012 4.00% 7.00% 4.00% Required: 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 3 There are no amendments or other unusual events in Year 3, but the actuary informs you that changes in expected future salary growth has created an actuarial gain. 125 170 Service cost Interest cost Expected return on plan assets Actuarial gain / (loss) Plan amendment Actual return on plan assets Benefits paid Employer contributions 250 (85) 100 Discount rate Expected return Salary increases 1/1/2013 4.00% 7.00% 4.00% 12/31/2013 4.00% 7.00% 4.00% Required: 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
