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Reporting Paper: Post-retirement Benefit Plans - Essay Example

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Reporting Paper: Post-retirement Benefit Plans

The most famous global accounting body is the Financial Accounting Standards Board (FASB) which is responsible for establishing generally accepted accounting principles for public, private and not-for-profit organizations. The company acquired in this scenario tends to follow the accounting standards issued by the FASB and both the issues relating to the different post-retirement benefit plans and the elimination of segments are described below. Post-Retirement Benefit Plans The defined contribution, defined benefit and other post-retirement plans are terminologies used within International Accounting Standard 19 (IAS-19). IAS-19 lays down the accounting and disclosure requirements for employee benefits. IAS-19 is only used in firms where the company provides its employees with facilities such as gratuity, pensions, termination and many more post retirement benefits. Defined contribution is a post employment benefit plan in which the employer and the employee pay a specific amount into a separate fund (usually in insurance companies which invest that amount o behalf of the employees and the returns are handed back to the employee after he/she retires). Under the defined contribution plan, the employer restricts himself to a fixed amount and frees himself from any legal or constructive obligation to pay the employees in case of any shortfalls. Therefore, the post employment benefit received by an employee is settled upon the fixed contributions paid in by the employer. This as a result puts a burden on the employee as the actuarial and the investment risk are tolerated by the employee rather than the employer. The costs recognized within the defined contribution plan should only include the contribution payable in exchange for the service provided by the employee in that particular period. Defined benefit is also a post-employment benefit plan which is different than the defined contribution plan. Under the defined benefit plan, the burden lies with the employer to provide the agreed benefits to both the existing as well as the previous employees. Under this plan, the actuarial and the investment risk lies upon the employer whereby the employer is liable to pay up for any shortfalls that may occur. Hence it is argued that the defined benefit plan is a more expensive form of benefit plan for the employer and it is more beneficial to the employees. There are different types of benefits that are given to the employees under the defined benefit plan. If an employee works out till the retirement age as prescribed by the employer, he/she may be entitled to a pension plan; this pension plan is usually based upon the average salary that the retired employee received till his retirement. The other option available within the benefit plan is that employees also receive some benefit whereby they leave the firm before the prescribed retirement age. In these circumstances, the employee receives certain benefit based upon the length of his service within the organization. The amount recognized within the Balance Sheet for defined benefit should include the Present Value of Defined Benefit Obligation less the Fair Value of Planned Assets and this amount should be adjusted accordingly for the actuarial gains/losses and the unrecognized past service cost. Besides these two benefit plans mentioned above, termination benefit is another ...Show more

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Reporting Paper Name University Reporting Paper To; The Chief Executive Officer; Organizations around the globe report their operations in order to keep their stakeholders informed. The most important stakeholders include the shareholders, customers, suppliers, employees and other potential investors…
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Reporting Paper: Post-retirement Benefit Plans essay example
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