36.8 SOURCES AND SUGGESTED REFERENCES American Academy of Actuaries, “An Actuary’s Guide to Compliance with Statement of Financial Accounting Standards No. 87.” AAA, Washington, DC, 1986. ______, “Actuarial Compliance Guideline for Statement of Financial Accounting Standards No. 88.” Actuarial Standards Board, Washington, DC, 1989. Accounting Principles Board, “Accounting for the Cost of Pension Plans,” APB Opinion No. 8. AICPA, New York, 1966. ______, “Accounting Changes,” APB Opinion No. 20. AICPA, New York, 1971. ______, “Reporting the Results of Operation—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” APB Opinion No. 30. AICPA, New York, 1973. Accounting Standards Executive Committee, “Accounting for and Reporting of Postretirement Medical Benefit (401(h)) Features of Defined Benefit Pension Plans,” Statement of Position 99-2. AICPA, New York, 1999. Financial Accounting Standards Board, “A Guide to Implementation of Statement 87 on Employers’ Accounting for Pensions: Questions and Answers.” FASB, Stamford, CT, 1986. ______, “A Guide to Implementation of Statement 88: Questions and Answers.” FASB, Norwalk, CT, 1988. 36 • 48 PENSION PLANS AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS Reconciliation of Funded Status 1. Actuarial Liability a. Disabled Participants ($12,000,000) b. Active Participants ($20,000,000) c. Total ($32,000,000) 2. Fair Value of Assets $0 3. Funded Status ($32,000,000) 4. Unrecognized Amount at Transition* $0 5. Unrecognized Net Loss/(Gain) $6,000,000 6. Unrecognized Prior Service Cost $0 7. (Accrued)/Prepaid Postemployment Benefit Cost at Year End ($26,000,000) *SFAS No. 112 did not allow delayed recognition of the transition obligation. Change in (Accrued)/Prepaid Postemployment Benefit Cost 1. (Accrued)/Prepaid Postemployment Benefit Cost at Prior Year End ($24,400,000) 2. Expense During Year* a. Service Cost $2,200,000 b. Interest Cost $2,800,000 c. Amortization of Loss/(Gain) $600,000 d. Total Expense $5,600,000 3. Payouts During Year** $4,000,000 4. (Accrued)/Prepaid Postemployment Benefit Cost at Current Year End ($26,000,000) *Since SFAS No. 43 applies to this plan, the annual expense is explicitly calculated as the sum of the service cost, interest cost, and amortization of unrecognized actuarial losses. Were this a SFAS No. 5 plan, the annual expense would equal the change in the actuarial reserve, adjusted for benefit payments made during the year. ** Since the plan is unfunded, benefit payments are treated as employer contributions. Exhibit 36.11 Illustration of SFAS No. 112 accounting. ______, “Accounting and Reporting by Defined Benefit Pension Plans,” Statement of Financial Accounting Stan- dards No. 35. FASB, Stamford, CT, 1980. ______, “Employers’ Accounting for Pensions,” Statement of Financial Accounting Standards No. 87. FASB, Stamford, CT, 1985. ______, “Employers’ Accounting for Settlements and Curtailments of Deferred Benefit Pension Plans and for Termination Benefits,” Statement of Financial Accounting Standards No. 88. FASB, Stamford, CT, 1985. ______, “Employers’ Accounting for Postretirement Benefits Other than Pension,” Statement of Financial Ac- counting Standards No. 106. FASB, Norwalk, CT, 1990. ______, “Accounting for Income Taxes,” Statement of Financial Accounting Standards No. 109. FASB, Nor- walk, CT, 1992. ______, “Reporting by Defined Benefit Pension Plans of Investment Contracts,” Statement of Financial Ac- counting Standards No. 110. FASB, Norwalk, CT, 1992. ______, “Employers’ Accounting for Postemployment Benefits,” Statement of Financial Accounting Standards No. 112. FASB, Norwalk, CT, 1992. ______, “Reporting Comprehensive Income,” Statement of Financial Accounting Standards No. 130. FASB, Norwalk, CT, 1997. ______, “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” Statement of Financial Ac- counting Standards No. 132. FASB, Norwalk, CT, 1998. ______, “Business Combinations,” Statement of Financial Accounting Standards No. 141. FASB, Norwalk, CT, 2001. Lorenson, Leonard, and Rosenfield, Paul, “Vested Benefits—A Company’s Only Pension Liability,” Journal of Accountancy, October 1983. Munnell, Alicia H., Economics of Private Pensions. The Brookings Institution, Washington, DC, 1982. 36.8 SOURCES AND SUGGESTED REFERENCES 36 • 49 [...]... principles and concepts discussed in this chapter Stock-based compensation plans and awards, however, tend to be unique; accordingly, the income tax and accounting consequences of any stock-based compensation award should be determined based on the specific terms of the award and the authoritative accounting literature and the tax laws and rulings in effect at the time of the award State and local income... impact on compensation expense and federal income tax expense to be recognized for financial reporting purposes, and the impact on earnings per share; (c) a summary of the federal income tax consequences of the awards to both the employer and the employee; and (d) exhibits illustrating the accounting and federal income tax consequences of hypothetical awards The discussion and exhibits demonstrate the... recognized compensation expense when outstanding awards are modified because of market value declines and, in many instances, require measurement and recognition of compensation cost for both the original and the modified award 37.3 APPLICATION OF APB OPINION NO 25 37 11 • FASB Interpretation No 44 addresses several issues related to modifications to stock option and award plans that change the life of... compensation expense in the amount of cash paid by the target company to acquire outstanding stock options and stock appreciation rights EITF Issue No 85-45, “Business Combinations: Settlement of Stock Options and Awards.” Similar to the consensus in EITF Issue No 84-13, this consensus indicates that when a target company settles outstanding stock options or awards “voluntarily, at the direction of the acquiring... in status and the terms are then modified to continue the award The modification in effect reinstates or extends the life of the award as a new award to the grantee immediately after the change in status Similarly, a modification and an effective reinstatement of an award is made if the terms of the award (or underlying plan) provide for the award to continue at the discretion of the grantor and the grantee... an extension of the award at the date the separation occurs and the life of the award is extended The intrinsic value of the award is measured at the date of the modification, and any intrinsic value in excess of the amount measured at the original measurement date is recognized as compensation cost if the separation occurs If the award vests and is exercised before the separation, any incremental intrinsic... award, the award and the canceled award are combined If canceled options remain that were not combined with a replacement award in the look-back period, the grantor then looks forward to the period described in (b) above If an award is granted during that period at an exercise price below that of the canceled award, the award and the canceled award are combined When looking backward and then forward,... replacement award requires variable accounting for the replacement award regardless of the amount of time between the cancellation and the replacement grant Any agreement between the grantor and the grantee when an option award is granted to cancel at a future date another outstanding option award requires variable accounting for the newly granted award from the date of grant The preceding also applies... nonreciprocal transaction between an entity and its shareholders, such as a stock dividend, spin-off, stock split, rights offering, or recapitalization through a special, large, nonrecurring dividend that causes the market value per share of the stock underlying the option award to decrease Such a restructuring may adjust the exercise price, the number of shares, or both of outstanding stock options or awards (Ordinary... the shares within six months of option exercise or share issuance, and the shares are not expected to be repurchased within six months after exercise or share issuance The stated share repurchase price is not the fair value of the shares at the date of repurchase, but the employee has made a substantial investment and must bear risks and rewards normally associated with share ownership for at least . Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” APB Opinion No. 30. AICPA, New York, 1973. Accounting Standards Executive Committee, “Accounting for and Reporting. Pensions and Other Postretirement Benefits,” Statement of Financial Ac- counting Standards No. 132 . FASB, Norwalk, CT, 1998. ______, “Business Combinations,” Statement of Financial Accounting Standards. outstanding stock options and stock appreciation rights. EITF Issue No. 85-45, “Business Combinations: Settlement of Stock Options and Awards.” Similar to the consensus in EITF Issue No. 84 -13,