TO: Chief Executive Officer
FROM: Senior Accounting Team A
DATE: October 25, 2010
SUBJECT: New Business Acquisition
Pursuant to your request, we have researched some of the issues with our new acquisition including researching the reporting requirements for defined contribution benefit plans, defined contribution plans, in addition to other post retirement plans and what must be done to eliminate the two segments in our new acquisition according to the Financial Accounting Standards Board (FASB).
Defined Contribution Plan: In a defined contribution plan, fixed contributions are paid into an individual account by employees and employers.  With the defined ...view middle of the document...
Since plan assets are restricted assets they are reported as noncurrent asset in the balance sheet and on the other hand any benefit payable within next 12 months is reported as current liability. If a company sponsors more than two plans than all over funded plan should be combined and reported as net assets and all underfunded plan should be combined and shown as one amount on the balance sheet. Any actuarial gains and losses along with prior service costs should be recognized as an increase or decrease in the comprehensive income.
There is some information that may not be shown on the financial statement but are disclosed in the notes. A schedule is required showing all major components of pension expense. A reconciliation of beginning and ending balances of plan assets due to the effect of the projected benefit obligation is required. All rates used to measure the benefit amounts needs to be disclosed. A table of pension plan assets is by category is disclosed. The disclosure will include the expected benefit payment for each of the next five fiscal years and an aggregate for the five fiscal years thereafter.
Other Post Retirement Benefits: FASB Codification 715-60-25 states that other post-retirement plans must be reported as an asset and a liability depending on whether the plan is overfunded or underfunded. In addition, an employer that sponsors one or more single-employer defined benefit postretirement plans other than pensions shall recognize in its statement of financial position the funded statuses of those plans. The employer shall aggregate the statuses of all overfunded plans and recognize that amount as an asset in its statement of financial position. It also shall aggregate the statuses of all underfunded plans and recognize that amount as a liability in its statement of financial position.
Any changes in the overfunding or underfunding of the plan must be reported in the year in which the change was made. The employer must also recognize any gain or loss from the plan in other comprehensive income. Footnotes to the financial statements must include any information relating to any delay of recognizing a gain or loss, any transitions of assets or obligations, and any prior costs and credits that would effect the next fiscal year reporting of the net periodic benefit cost.