Coca Cola vs. Pepsico

Coca Cola Vs. PepsiCo

Accounting 305

1. Compare the pension plans of Coca-Cola and PepsiCo, including type of plan and funded status at 2007 year-end.

PepsiCo. Inc.

Pension and retiree medical service costs are measured at a fixed discount rate. The amortization of gains and losses due to demographics, including salary experience, are reflected in division results for North American employees. The division results also include interest costs, which are measured at a fixed discounted rate for retiree medical plans. Interest costs for the pension plans, pension asset returns and the impact of pension funding, and gains and losses are reflected in corporate unallocated expenses. In addition, corporate unallocated expenses. This includes the difference between the service costs measured at a fixed discount rate and the total service costs determined using the Plans discount rates which are disclosed in Notes.

Pepsi also offers a pension plan for their full-time employees in the US and certain international employees. The benefits are based on years of service or a combination of years of service and earnings. Pepsi offers medical and life insurance benefits for US and Canadian retirees that is based upon age and service requirements. Pepsi’s share of retiree medical costs is capped at a specific dollar based upon time in service with the remaining costs passed on to the retiree.

Coca Cola

Coca-Cola sponsors and contributes to the pension and postretirement health care and life insurance plans for all US employees. They also offer nonqualified unfunded defined benefit pension plans for certain associates. They also offer various plans outside of the United States. By year end 2006 Coca-Cola and Pepsi had adopted SFAS 158

2. Calculate the relevant rates that were used by Coca-Cola and PepsiCo in computing their pension amounts.

Pepsi had a discount rate of 5.7% for their...