Segment Reporting Memo

Segment Reporting Memo Week 5

ACC/541

December 23, 2013

Leslie Crews

Segment Reporting Memo Week 5

To: Leslie Crews, CEO

From: Roslyn Updegraff, Controller

Date: December 23, 2013

Reference: ABC Manufacturing Corporations Acquisition of DEF Company

Subject: Segments and pension plans of newly acquired DEF Company

We have recently acquired one hundred percent of DEF Company. This new acquired company already has in place two segments and two different pension plans. Our goal is to define the pension plans and how to report them on our financial statements. We also would like to eliminate the two segments and must know how to do so correctly without repercussions to the parent company. This memo should assist the Chief Executive Officer in making the decision for how to continue with our new acquisition.

Reporting For Defined Contribution Plans

401k and 403b plans are examples of defined contribution accounts. In a defined contribution plan, the employer commits a predetermined contribution on a specified schedule. These contributions are usually based on a percentage of the employee’s salary, the number of hours worked, or a set dollar amount contributed per pay period, monthly, or annually. The benefits the employee earns are determined by the performance of the invested funds over the life of the investment. In this pension plan, the employer has agreed to contribute a certain amount each year. Sometimes both the employer and the employee agree to contribute to the employee’s account. There contributions are invested for the employee and at retirement they will receive the balance in the account, which will then consist of the contributions plus or minus the gains or losses. There is no employer commitment to an ending benefit amount, as contributions are made only during the employment period, even though the investment may gain or lose value indefinitely. The accounting practice for defined contribution...