Executive Memorandum

Executive memorandum
to: accounting staff
from: Nicole Bailey, controller
subject: Company a pension plans reporting & segments
date: 8/1/2011
cc: John Person, Ceo
Company A offered two different pension plans to its employees and also reported two different segments. With the recent acquisition of Company A, I have found it in everyone's best interest to review/introduce the financial reporting requirements for a defined contribution plan, a defined benefit plan, and other postretirement plans (OPRB's) along with an overview of the process for eliminating the two segments.
A defined contribution plan's reporting is very straightforward because the risk is transferred to the employee and the amount of money to be contributed by our organization is known and fixed. For example, if we agree to match and invest up to 3% of an employee's salary for each year that they work for us, we are able to record exactly how much our obligation to our employees is each year. We can simply expense the required contribution as it is incurred (Schroeder, et al, 2011).
A defined benefit plan carries much more risk and its reporting is much more difficult to project because of several variables (mortality, turnover, compensation levels, and length of service). Its recorded expense, the annual pension fund obligation, is calculated using a formula usually created by an actuary, and is only an estimate. The Financial Accounting Standards Board (FASB) requires that all pension providing organizations' financial statements must include (1) the net assets available for benefits, (2) changes in net assets that occur during reporting period, (3) the actuarial present value of accumulated plan benefits, and (4) plans amendments and changes in actuarial assumptions that will have/have had a significant effect on the actuarial present value of accumulated plan benefits (Schroeder, et al, 2011).
Disclosure is a very important part of of FASB ASC 715-30-Defined Benefits...