Financial Education

Pension plans promise employees a benefit that will be received at a future time. Estimating the cost of these benefits requires many discretionary assumptions. These include an appropriate discount rate to determining the present value of future benefits, the estimated rate of future compensation increases, and the expected return on plan assets. The primary impact of these assumptions is illustrated in the table below.

For more information, see all articles on: Accounting, Adjusting Reported Financial Statements, Financial Statement Analysis, Fundamental Analysis

See also:

Using Pension Disclosures to Understand the Underlying Economic Position

Income Statement Accounting for Pension Expense: An Overview

Pension Obligation Assumptions

Pensions: Defined Benefit versus Defined Contribution

Adjusting Net Income to Reflect Economic Pension Expense