Pension funds

Examples of Pension funds in the following topics:

• Overview of Pension Accounting

  • So, the company must invest in a fund in order to meet its obligations to the employee.
  • The last complication comes from the rules that require companies to prevent over/under stating the pension funds.
  • The employer (sponsor) reports pension expense on the income statement, and a pension liability which is the sum of two accounts, accrued/prepaid pension cost and additional liability, and an intangible asset-deferred pension cost (if required).
  • In addition to reporting the pension expense on the income statement companies should disclose the following information about the pension plan:
  • Plan description (including benefit formula, employee groups covered, funding policy. and types of assets held)

• Types of Long-Lived Assets

  • Other types of investments include investments in special funds-- e.g. sinking funds or pension funds-- and different forms of insurance.

• Equity Method

  • Equities held by private individuals are often held as mutual funds or as other forms of collective investment schemes, many of which have quoted prices that are listed in financial newspapers or magazines.
  • Mutual funds are typically managed by prominent fund management firms, such as Schroders, Fidelity Investments, or The Vanguard Group.
  • Such holdings allow individual investors to obtain diversification of the fund(s) and to make use of the skill of the professional fund managers in charge of the fund(s).
  • An alternative, which is usually employed by large private investors and pension funds, is to hold shares directly.
  • In the institutional environment, many clients who own portfolios have what are called segregated funds, as opposed to or in addition to the pooled mutual fund alternatives.

• What Goes on the Balances Sheet and What Goes in the Notes

  • For example, companies that pay pension plan benefits require additional footnote disclosure that provide the user with additional details on pension costs and the assets used to fund it.

• Defining Liabilities

  • Long-term liabilities have maturity dates that extend past one year, such as bonds payable and pension obligations.

• Types of Cash

  • Types of cash include currency, funds in bank accounts, and non-risky financial instruments that are readily convertible to cash.
  • However, unlike with a savings account, whatever funds a consumer puts into a CD generally cannot be withdrawn prior to a certain date without incurring significant penalties.
  • Demand CDs allow a customer to withdraw funds from the CD whenever the customer wants without incurring a penalty.

• Cash Controls

  • Prevent the business from having "idle funds"—more cash than is necessary to function.
  • These funds can instead by invested for higher return.
  • Electronic Funds Transfer (EFT): By using services that transfer funds automatically, such as through PayPal, a business can minimize the number of people who have access to its funds.

• Classifying Liabilities

  • These usually include issued long-term bonds, notes payables, long-term leases, pension obligations, and long-term product warranties.

• Using a Bank for Control

  • As an independent third party, a bank is less susceptible to schemes by a business's employees to steal funds.
  • Since a bank holds a business's funds, it provides a physical barrier preventing employees from accessing the cash.
  • Most banks keep "signature cards" on hand for business accounts so its tellers are aware who can sign checks to withdraw funds.

• Accounting for Interest Earned and Principal at Maturity

  • It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds.
  • Some structured bonds can have a redemption amount which is different from the face amount and can be linked to performance of particular assets such as a stock or commodity index, foreign exchange rate, or a fund.
  • Some structured bonds can have a redemption amount which is different from the face amount and can be linked to performance of particular assets such as a stock or commodity index, foreign exchange rate, or a fund.