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

  • describe the types of post-employment benefit plans and 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 costs;
  • explain and calculate the effect of a defined benefit plan's assumptions on the defined benefit obligation and periodic pension cost;
  • explain and calculate how adjusting for items of pension and other post-employment benefits that are reported in the notes to the financial statements affects financial statements and ratios;
  • interpret pension plan note disclosures including cash flow related information;
  • explain issues associated with accounting for share-based compensation;
  • explain how accounting for stock grants and stock options affects financial statements, and the importance of companies' assumptions in valuing these grants and options.


  • Defined contribution pension plans specify (define) only the amount of contribution to the plan; the eventual amount of the pension benefit to the employee will depend on the value of an employee's plan assets at the time of retirement.
  • Balance sheet reporting is less analytically relevant for defined contribution ...

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