How does a company calculate pension payouts and long term liability

Expert Solution

Pension liability is nothing but difference between plan assets and plan obligation. Most of the cases, the plan obligation is more than the plan assets, thus it will create the liability.

Pension liability = Pension assets - pension obligations

Pension assets:

Plan assets is the value of the investments held by the specific pension plan. Pension funds hold debt and equity investments of these assets and earn interest on the assets to pay present and future benefits.

Pension obligations:

It is the amount of total obligation a defined benefit pension plan has accrued for its past and present members and retirees.

Pension liability :

pension liability is called the unfunded actuarial accrued liability.

Long-term liability:

The company calculates the balance of long-term liabilities by taking thel face value of the loan minus any principal payments made. The company calculates the principal payments made by determining the amount of interest paid.

I hope this will help you.

ekkarill92 answered 2 years ago

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