Question

How defined benefit, defined contribution, and postretirement benefit plans are reported on financial statements?

Answer 1

Defined benefit plans reported on financial statement :

Under a defined-benefit plan, a company reports either a net pension asset or a net pension liability. Conversely, a company's balance sheet will reflect a net pension liability if the present value of the estimated pension obligation is higher than the fair value of the pension fund's assets .

Companies must recognize on their balance sheet the overfunded (pension asset) or underfunded (pension liability) status of their defined-benefit pension plan.

This Statement requires the notes to the financial statements of defined contribution plans to include a brief plan description, a summary of significant accounting policies (including the fair value of plan assets, unless reported at fair value), and information about contributions and investment concentrations

Defined contribution plans reported on Financial statement :

In a defined contribution plan, fixed contributions are paid into an individual account by employers and employees. The contributions are then invested, and the returns on the investment (which may be positive or negative) are credited to the individual's account

This Statement also requires the notes to the financial statements of defined contribution plans to include a brief plan description, a summary of significant accounting policies (including the fair value of plan assets, unless reported at fair value), and information about contributions and investment concentrations

Post retirement benefit plans reported on Financial statemnt :

The benefits that fall within this category are all of the non-cash payment benefits available to employees, These additional benefits, can be a large expenditure for companies offering these plans, especially if the plans are fully funded by the company.

The costs of these plans can be found in a company's financial statements, usually in the notes, which will also disclose the size of the obligation along with how well funded the fund is.