You are part of an accounting consulting team that has been engaged to help ABC Company consider

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Question:

You are part of an accounting consulting team that has been engaged to help ABC Company consider its financial accounting choices for their defined benefit pension plan. You have been given job comparing the corridor method amortization of accumulated other comprehensive income gains and losses vs. expensing all unexpected returns and actuarial changes in the period in which they occur, the two most extreme alternatives. After looking at these alternatives, the company will consider its choices further.

+ APension Expense Component: Recognition of Net Gains and Losses Corridor Method, amortization over service lives of partic

The five years of data[1] that you will use are the following:

20x4 20x5 20x1 123-13 9451 -133 50 1034 -179 1015 Pawel Bone Mit Olliyuliuin, beginning of year Taar Vulio of Pkn Asscts, Leg

To focus the comparisons on the issues involved in this accounting method choice, you will use the following simplifying assumptions:
Assumptions
· Beginning Balance AOCI - Net Gains and Losses $0
· Service Lives of All Pension Participants (in each of the five years modelled) 20 years
· Beginning Balance AOCI – Prior Service Cost $2892
· Average Service Lives of Prior Service Cost Participants in 20x1 10 years
· Assume that the prior service cost estimate is accurate over the next five years, so average service lives of prior service cost participants declines to 9 years in 20x2, 8 years in 20x3, etc.

Deliverables
1. An Excel workbook that accurately calculates pension cost, and the related balance sheet accounts of Accumulated Other Comprehensive Income – Prior Service Cost (AOCI-PSC), Accumulated Other Comprehensive Income – Net Gains & Losses (AOCI-G&L), Projected Benefit Obligation (PBO), and Plan Assets at Fair Value (PA-FV) for both alternatives for five years.

A written summary of your work that explains how the alternatives differ from each other, including a chart that provides data visualization of the differences you found. Provide the company with a summary of the advantages of each alternative.