Reporting Paper

MEMORANDUM

TO: Chief Executive Officer

FROM: Account Controller

SUBJECT: Required Reporting for Pensions

DATE: February 7, 2014

The purpose of this memo is to address several issues that are to be well thought of in the middle of the company’s acquisition of another company. To begin with, the acquired company has two unlike pension plans whose reporting provisions are unknown to the firm. Next, the acquired company has two segments that are not suitable for the firm’s requirements, and have to be aimed at for closing. Therefore, this memo explains the reporting requirements of pension plans, that is to say, defined contribution, defined benefit and more postretirement plans. Moreover, this memo explains how to close an unwanted segment.

Defined contribution is a plan in which the employer decides to pay a secured amount to the employees’ pension fund each year at the same time the employee works for the company. In similarity, defined benefit is a plan in which the employer warrants to pay the employee a secured monthly income for life when retired. ASC 960-10-5-4 states ”A defined benefit plan is responsible for paying participants indicated benefits that are clarified and are created on components as age, time of service and reward” (FASB, 2009, para. 4) (IAS 26). The two pension plans assure the employee will receive financial compensations, both directly or indirectly, from the employer at retirement.

The monetary reporting of a defined contribution plan is forthright. ASC 962-10-05-8 states that, “a defined contribution plan is usually a topic of the recording and the conditions of The Employee Retirement Income Security Act of 1974” (FASB, 2009, para. 8) (IAS 19). The employer only keeps information on the pension outlay that is equivalent to the cash contribution to the employee. For example, once the company decides to pay the correspondent of 5 percent of the yearly salary of the employee to the pension plan, the company’s monetary...