Defined Benefit PLAN- Lecture PDF

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DEFINED BENEFIT PLAN-WORKSHEET APPROACH The benefit plan shall be viewed as a subentity separate and distinct from the primary entity, which is the employer entity. The subentity maintains information that does not appear Fair Value of Plan Assets (FVPA) The fair value of the plan assets is the source of fund set aside in meeting future benefit payments. FVPA is analogous to an off-statement of financial position asset with a debit balance. Projected Benefit Obligation (PBO) of Defined Benefit Obligation(DBO) The present value of expected future payments required to settle the obligation arising from employee service in the current and prior periods. PBO is analogous to an offstatement of financial position liability with a credit balance. FVPA and PBO are kept only in the memorandum records of the subentity. The “Prepaid/Accrued benefit cost” is the item that appears on the financial statement of the employer entity. FVPA>PBO – the plan is overfunded and therefore there is a prepaid benefit cost, a noncurrent asset. FVPA...