After completing this chapter, you will be able to do the following:

  • Describe the types of postemployment benefit plans and the implications for financial reports.
  • Explain and calculate measures of a defined benefit pension obligation (i.e., present value of the defined benefit obligation and projected benefit obligation) and net pension liability (or asset).
  • Describe the components of a company’s defined benefit pension expense.
  • Explain and calculate the impact of a defined benefit plan’s assumptions on the defined benefit obligation and periodic expense.
  • Calculate and explain the effects on financial statements of adjusting for items of pension and other postemployment benefits that are reported in the notes to the financial statements.
  • Interpret pension plan note disclosures including cash flow related information.
  • Evaluate the underlying economic liability (or asset) of a company’s pension and other postemployment benefits.
  • Calculate the underlying economic pension expense (income) and other postemployment expense (income) based on disclosures.
  • Explain issues involved in accounting for share-based compensation.
  • Explain the impact on financial statements of the accounting for stock grants and stock options, and the importance of companies’ assumptions in valuing these grants and options.


  • Defined contribution pension plans specify (define) only the amount of contribution to ...

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