Segment Elimination and Pension Plans


From: Controller
Date: February 13, 2012
Subject: Segment Elimination and Pension Plans

          The 100% acquisition of another company by the manufacturing company will bring two new pension plans that will be effective to increase the employees' motivation. The different pension plans require different reporting.
          A defined contribution plan set forth a certain amount that the employer is to contribute to the plan each period.   There are no definite amounts of benefits to be paid.   The retirement benefits received by the recipient are determined by the return on the invested pension funds during the investment period.   Accounting for defined contribution plans is the risk for future benefits is borne by the employee, the employers only cash outflow is the annual contribution to the pension plan fund.   The FASB codification sets that employees may choose their investment plan or pension plan according to their future requirements.
          When a company adopts a defined contribution pension plan, the employer’s financial statements should disclose the existence of the plan, the employee groups covered, the basis for determining contributions, and any significant matters affecting comparability from period to period.   According to FASB codification, the organization has to disclose the description of the beneficiaries, contribution basis and all other factors that may affect the investment account's comparability (Epstein, Nach & Bragg, 2009).
          A defined benefit plan can be defined as the retirement plan that provides a fixed amount to the retiree per month. The amount generally based on the income and years of service of the employees. The salary history and employment duration are used in a formula to calculate the pension benefit for retiree. The risk of the investment and portfolio management is entirely subjected to control under company management (Zwick & Jurinski, 1999). The basis of calculations...