By NEAS - 5/2/2018 12:50:29 PM
FA Module 14: Employee pensions and share-based compensation (overview)
(The attached PDF file has better formatting.)
Reading: chapter 10
● § 4 introduction to pensions and other post-employment benefits, excluding
○ Example 15 (Pension-related disclosures)
Reading: chapter 14
● § 2 pensions and other post-employment benefits, excluding
○ sub-section 2.4 (Disclosure of pension and other post-employment benefits – all sub-sections of 2.4 are excluded)
● § 3 share-based compensation, excluding
○ exhibit 6 (SABMiller plc)
○ exhibit 7 (American Eagle Outfitters)
○ exhibit 8 (GlaxoSmithKline, plc)
○ Example 7 (Coca cola)
This module deals with defined benefit pension costs; defined contribution pension costs are not materially different from other expenses. Other actuarial exams deal with measuring a defined benefit pension plan’s obligations; this course covers financial statement reporting of defined benefit pension plans.
Measuring the defined benefit pension plan liability is needed for reporting it; you must understand the basic measurement procedures. Final exam problems focus on GAAP and IFRS reporting. The practice problems on the discussion forum show the types of questions asked.
Sub-section 2.4 discusses several alternative disclosures and their use for readers of financial statements. This course focuses on the GAAP and IFRS requirements; sub-section 2.4 adds unneeded complexity.
Know how five factors affects defined benefit liabilities (periodic pension costs) for GAAP and IFRS:
● service costs: current service vs past service costs; net income vs other comprehensive income
● net interest expense / income: discount rate vs expected return on plan assets
● remeasurement: actuarial gains or losses; actual vs expected return on plan assets
● actuarial gains and losses: major types
● changes in assumptions: discount rate, expected returns
Know the differences for funded vs unfunded liabilities of defined benefit plans.
Share-based compensation differs from ordinary wages and salaries. Focus on
● Stock grants vs stock options
○ effects on retained earnings, paid-in capital, and shareholders’ equity
● Executive stock options: historical cost vs fair values
○ influences on fair value of stock options
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