Pension Plan Classication Your employer, Zant Industries, is beginning to offer
ID: 2458692 • Letter: P
Question
Pension Plan Classication Your employer, Zant Industries, is beginning to offer its employees a pension plan. The plan requires a certain predetermined percentage of employee salary for annual contributions, and it guarantees a benet based on years of service and company rank upon retirement
The CEO, Susan Wilkes, believes that this plan should be accounted for as a dened benet plan, since the level of employee benet is guaranteed upon retirement. The CFO, Dwight Kurt, believes that it should be accounted for as a dened contribution plan, since the amount of each employee’s contribution is xed and determinable.
Research the appropriate Codication and determine whether the CFO or the CEO is correct.
Explanation / Answer
FASB 960:
As per FASB 960 Plan Accounting - Deferred Benefit Pension Plan, a pension plan that specifies specified pension benefit based on age, years of service and earnings, is called deferred benefit pension plan. This also includes fixed rate of employer contribution.
As the above mention plan satisfies the conditions as per FASB 960, it should be accounted for as defined benefit pension plan.
Hence, CEO is correct.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.