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Economic Pension Expense

Till now our discussion regarding defined benefit pension reporting has focused on the accounting rules and techniques that company management can apply to pension plan assumptions to window dress financial statements.

When evaluating a company, the financial analyst seeks to determine the true economic positions of the company. For companies with defined benefit pension plans, the analyst will need to calculate the economic pension expense.

Economic Pension Expense = the sum of changes to the DBO netted against the actual return on plan assets

Economic Pension Expense

Alternatively:

Economic Pension Expense = Δ Funded Status – Company Contributions

Previous Lesson

The Role of Actuarial Assumptions in DB Plan Accounting

Pensions and the Statement of Cash Flows

Financial Reporting Part 2

30 lessons

CFA Level 2: Financial Reporting Part 2 – Introduction

Intercorporate Investments Accounting - Ownership Categories

Minority Passive Investments – Accounting Classes

Minority Active Investments and the Equity Method for Financial Reporting

Joint Venture Investments

Controlling Interest Investments: Accounting for Business Combinations

Purchase Method of Accounting for Controlling Interest Investments or Acquisitions

Pooling of Interests Method to Account for Controlling Interest Investments

Purchase Method vs. Pooling of Interest Method

Acquisition Method to Account for Controlling Interest Investments

GAAP Purchase Method, IFRS Purchase Method, and GAAP Acquisition Method Accounting

Variable Interest Entities (VIEs) and Special Purpose Entities (SPEs)

Defined Benefits Plans vs. Defined Contribution Plans

Measuring the Defined Benefit Obligation

Pension Expense (both GAAP & IFRS) for the Income Statement

Defined Benefit Plans & the Company Balance Sheet

The Role of Actuarial Assumptions in DB Plan Accounting

Economic Pension Expense

Pensions and the Statement of Cash Flows

Accounting for Stock (or Share) Based Compensation

Financial Statement Consolidation of Multinational Operations

Consolidation: Presentation Currency vs. Functional Currency vs. Local Currency

Foreign Currency Translation

Temporal Method for Translation of Foreign Statements

Current Rate Method for Translation of Foreign Statements

Consolidating Financial Statements: Determining the Functional Currency

Translation Methods and Financial Statement Effects

Accounting for Subsidiaries in Hyperinflationary Economies

CFA Level 2: Financial Reporting 2 - Recommendations

MBS Weighted Average Life

Topics

Financial Analysis