Chapter 20 Introductory Commentary
Employee compensation comes in many forms. Salaries and wages
provide direct and current payment for services provided. However, it is
common place for compensation to include benefits payable after
retirement.
Accounting for pension benefits recognizes that pension benefits represent
deferred compensation for current service. Accordingly, the cost of these
benefits should be recognized on an accrual basis during the years that
employees earn the benefits.
This week, you will learn about two types of pension plans.
 a defined contribution pension plan. This is relatively easy to
account for. Today, more than two-thirds of workers covered by
pensions are covered by defined contribution plans.
 a defined benefit pension plan. This is the type of pension plan
that your parents were most likely covered by. Most likely, you will
never see a defined benefit pension plan.
This is a sensitive and emotional topic for most employees. This is why I
included the cartoon showing the famous Norwegian “scream” painting.
Notice that the person is screaming when looking at the 401K statement.
Sometimes, cartoons tell us a lot about life!
For this topic, I included one background article that provides a concise
overview of the change in pension accounting rules. The article was
published in the CPA Journal in November 2006. I recommend that you
read the article before viewing the VoiceThread commentaries included on
the mind map diagram.
The mindmap diagram breaks the discussion of pension plans into 9 key
issues. Issue #10 compares US GAAP to IFRS’s accounting for pension
plans. There is a streaming video commentary for each of the 10 issues.
This week’s materials include a “virtual guest speaker.” I recorded two
video conversations with Dr. John Hepp, a partner with Grant Thornton
International. Dr. Hepp and I worked together in the National Office of
Grant Thornton for several years. The video conversations provide an
interesting way to bring the expertise of someone like Dr. Hepp to class.
Dr. Hepp is an authority in pension accounting. He is the author of the
FASB’s post retirements benefits pronouncement. This topic is covered in
Appendix 20A of Kieso 14th Edition. The discussion begins on Page 1241
of the text.
This week’s homework assignments include several WileyPlus simulationbased assignments.
Quiz #4 will give you practice researching pension-related questions.
As you will find, pension accounting is a very complex topic. We are barely
scratching the surface.
My objective is for you to learn the “overview” of pension accounting. You
will learn the language of pensions. You will learn the basics of how
pension expense is calculated. You will learn how pensions are reported
on a company’s balance sheet and in the footnotes.
What you learn this week should prepare you for what you need to know for
the CPA Examination. If you need more, you will learn this through your
firms and continuing professional education.
Your workload for this study week is greater than in the previous three
weeks. This week, you will complete FASB Codification Research Project
#1. Hopefully, you have completed the six short tutorials in the FASB
Learning Guide. The tutorials are the best way I know of for you to learn
how to research issues in the FASB Codification Research Service.
Pay close attention to instructions for completing the FASB Research
Project #1. In particular, be sure to FORMAT YOUR SOLUTION as
illustrated on the Class Assignments Schedule.
Submit your Project #1 solution through the SUBMIT ASSIGNMENTS
option on the Blackboard home page.
Please note that WileyPlus home is due by 11 PM (LA Time) Saturday
evening, November 2, 2013.
Please note that I gave you an additional day to submit the FASB
Codification Project #1. This assignment is due by 11 PM (LA Time)
Sunday evening, November 3, 2013.
Manage your study time carefully. There is way too much material in
Chapter 20 to be completed in one day. Work in short spurts. Don’t wait
until the last minute to begin your Chapter 20 studies.
As always, contact me on Skype with any questions or comments. If you
need a special meeting time, please submit an APPOINTMENT REQUEST
form. The form is found on the VIRTUAL OFFICE HOURS web page.
Have a great study week.