- CFA Exams
- 2023 Level II
- Topic 3. Financial Statement Analysis
- Learning Module 12. Employee Compensation: Post-Employment and Share-Based
- Subject 4. Other Post-Retirement Benefits
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Subject 4. Other Post-Retirement Benefits PDF Download
Postretirement benefits other than pensions include health care benefits and other welfare benefits (i.e., tuition, eye care, legal & tax services, day care, housing assistance) for retirees, their dependents and spouses.
These benefits receive very similar accounting treatment to pension benefits.
- The annual postretirement nonpension expense consists of many similar components used to compute annual pension expense. The components are: service cost + interest cost - actual return on plan assets + amortization of prior service cost +/- gains and losses + amortization of transition obligation.
- The disclosure requirements are similar.
There are two primary differences:
- Nonpension benefits are typically not pay related. There is only one measurement which is the accumulated postretirement benefit obligation (APOB). APOB is the actuarial present value of future benefits attributed to employees' services rendered to a particular date.
- There is no minimum liability provision in accounting for nonpension benefits because the difference between the periodic cost and contributions is the liability.
In general these benefits are not funded.
Learning Outcome Statementsexplain and calculate how adjusting for items of pension and other post-employment benefits that are reported in the notes to the financial statements affects financial statements and ratios;
interpret pension plan note disclosures including cash flow related information;
CFA® 2023 Level II Curriculum, Volume 2, Module 12
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