Open Arms Industries Has a Noncontributory, Defined Benefit Pension Plan

question 242

Essay

Open Arms Industries has a noncontributory, defined benefit pension plan. During 2018, changing economic conditions caused the actuary to increase the assumed rate of salary progression.
Required:
1. Does the change create a gain or does it create a loss for Open Arms? Why?
2. Assuming the magnitude of the change is $7 million. Prepare the appropriate journal entry to record any 2018 gain or loss. (Ignore income taxes.) If Open Arms prepares its financial statements according to U.S. GAAP, how will the company report the gain or loss?
3. Would your response to question 2 differ if Open Arms prepares its financial statements according to International Financial Reporting Standards (IFRS)?

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Definitions:

Monthly Revenues

The total income generated by a business or entity from its activities within a month.

Bar Graph

Also known as a bar chart, a graphic presentation of statistical information resembling the histogram except that there may not be a numeric scale on the horizontal axis and the bars normally do not touch each other.

Line Graph

A type of graph often used for illustrating data over time.

Histogram

A graphical representation of the distribution of numerical data, using bars of different heights to show frequencies of data within successive intervals.