Question

Please describe the different ways that pension obligation can be measured which method is preferred by FASB

Answer 1

As per accrual accounting related with pensions, this statement invloves past pension accounting such as setting off assets and liabilities, delaying of revenue and expenditure, reporting net cost. These 3 priciples follows for pensions.

The delayed recognition and the amendments in the pension obligations changes in the value of assets over the years because the revenue and expenditure are recognized systematically and periodically. The changes in the revenue and expenditure, assets and liabilty should be identified in terms of value .
The feature of net cost is , in Financial Statement, it calculate as the factors that affect positively or negatively the pension plan (lumsum value)

It icludes 3 aspects:
1. The compensation of expenditure of benifit promised.
2. Interest expenditure as part of these benifits.
3. The return from investment and asset.

Offsetting feature involes pension expenditure, pension liability and plans and the value of assets. It is included in the financial statement. Assets willbe there evenif liabilities are not set off and the risk will be born by the employer.
Considering these 3 aspects, it is helpful for management in financial reporting throgh the below changes:
1.As per this statement, to identify employees compensation expenditure and the company policy, there should be a certain approach according to enployees performance based on his or her service period.
2. There should be recoginition and limited liabilty for non taxable benifits.Approval should be there if the fair value of plan asset exceeds. It leads to increase in the pension expenditure.
3. The more accurate, complete and current information should be included in the disclousre.

Measrement. and Recoginition
Depending on employees service period and past range of methods, Management can understand employees pension details.
Employers use diffrent accounting methods for different plans.
Management believe that pension plan is important and relevant to employees based on plan benifit formula.

Delayed recognition should be included in the disclousre and the Finanicial Statements.