International Paper Company’s 2011 annual report disclosed the following pension

Question

International Paper Company’s 2011 annual report disclosed the following pension information: Benefit obligations and fair values of plan assets as of December 31, 2011, for International Paper’s pension and postretirement plans are as follows: In millions Benefit Fair Value of Obligation Plan Assets U.S. qualified pension $10,197 $8,185 U.S. nonqualified pension 358 – U.S. postretirement 425 – Non-U.S. pension 183 155 Non-U.S. postretirement 23 – a. What is the funded status of the company’s U.S. pension plans? What proportion of total pension obligation is funded? b. What proportion of total post-employment obligation is funded? Briefly explain why this is so. (Careful! - It does not matter whether the pension obligation is U.S. or Non-U.S., it is still an obligation.)

Explanation / Answer

a.Funded Status of company=Plan Assets - Projected Benefit Obligation (PBO)

                                      = (8,185 +155) - (10,197 - 358 - 425 - 183 - 23 )= -2846
Plan Assets < Projected Benefit Obligation means the funded status of the plan is "Underfunded" plan.
Proportion of total pension obligation funded = 8340 / 11186 = 74.56%

As seen, the post-retirement obligation are not funded.

Accounts Payable Turnover = COGS / Average Accounts Payable
Accounts Payable Turnover = 47,860 / 6,741 = 7.099

Days Payable Outstanding (DPO) = Ending accounts payable / (cost of sales/number of days)
DPO = 6857 / (47860/365) = 52.2943 days

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