In a defined contribution pension plan, who assumes the investment risk?
Explanation
In a DC plan, the employer's obligation ends with the fixed contribution; the final payout depends on the fund's performance, which is the employee's risk.
Other questions
A bond is issued with a coupon rate of 8 percent and a yield-to-maturity (YTM) of 10 percent. How will this bond trade and how will the liability change over time?
Regarding the calculation of interest expense for a bond reported at amortized cost, which formula is correct?
Under IFRS, how are bond issuance costs treated at the time of recognition?
A company issues a bond at a premium. What is the relationship between the interest expense and the coupon payment?
If a company chooses the fair value option for reporting its debt, where are gains and losses resulting from changes in the bond's YTM reported?
A company redeems bonds with a book value of 98,000 dollars for a redemption price of 102,000 dollars. What is the impact on the Income Statement?
Which of the following is an example of a negative covenant?
What is a primary motivation for a lessee to structure a lease as an operating lease rather than a finance lease (prior to modern standard convergence)?
Under US GAAP, how is the 'Service cost' component of pension expense recognized?
Which ratio measures the percentage of total assets financed with debt?
Using the 'Discount Bond' example in the text (Face Value 1000, YTM 20 percent, Coupon 10 percent): The liability at the start of Year 1 is 741. What is the liability at the end of Year 1?
For a US GAAP operating lease, how is the lease expense reported in the lessee's income statement?
What is a 'Synthetic lease'?
In the context of Defined Benefit pension plans, what does the balance sheet report?
Which of the following represents the Financial Leverage Ratio?
For a 'Premium Bond' (Coupon 10 percent, YTM 5 percent), what happens to the liability value over time?
How is the Interest Coverage Ratio calculated?
Under US GAAP, where are actuarial gains and losses (remeasurements) for pension plans initially recognized?
In a lease arrangement, if the lessee reports a 'Right of Use' asset and a Lease Liability, and recognizes both depreciation and interest expense, what type of lease is it under US GAAP?
What is the definition of the Fixed Charge Coverage ratio?
Which of the following represents an affirmative covenant?
Under US GAAP, if a bond is derecognized before maturity, what additional adjustment is required for the gain/loss calculation that is not required under IFRS?
What is the Cash Flow Statement impact for a lessee with a US GAAP operating lease?
How does amortizing a bond discount affect the book value of the liability?
A bond has a Face Value of 1000 dollars and a Coupon Rate of 10 percent. If the market yield (YTM) is 20 percent, what is the annual coupon payment?
In the context of US GAAP Pension accounting, 'Past service cost' is recognized in:
Which covenant restricts the disposal of assets?
For a Lessor under US GAAP, if a lease transfers substantially all risks and rewards of ownership, it is likely classified as:
What happens to the Interest Expense of a Discount Bond over time?
If a company uses the 'Corridor method' for pension accounting, what is it amortizing?
Under IFRS, interest paid on a lease liability is classified in the Cash Flow Statement as:
What is the Debt-to-Capital ratio formula?
In a Defined Benefit plan, if the plan assets are less than the Pension Benefit Obligation (PBO), the plan is:
Which type of lease results in the removal of the leased asset from the Lessor's balance sheet?
For a bond issued at a discount, how does the annual 'Discount amortized' relate to the Bond Liability values?
What is the primary effect of capitalization of bond issuance costs under US GAAP compared to IFRS?
Which bond type maintains a constant liability value throughout its life?
Identify the 'Affirmative covenant' from the list below.
In the context of leasing, what is the 'Short-term lease' exception?
When a company increases its valuation allowance for deferred tax assets (related context from chapter, often impacting equity/liabilities analysis), what happens to earnings?
What is the main difference between IFRS and US GAAP regarding the classification of lease cash flows for a Lessee's finance lease?
For a bond issued at a premium, the unamortized premium is calculated as:
Which pension plan type defines the benefit based on years of service and compensation?
What happens to the effective interest rate of a bond under IFRS when issuance costs are included?
Regarding 'Remeasurement' in pension accounting (Actuarial gains/losses), what is the 'Corridor'?
Which ratio would be most negatively affected by capitalizing a lease (Finance lease) compared to an Operating lease (pre-accounting change)?
A Lessor reports 'Lease income' in the income statement and retains the asset on the balance sheet. What type of lease is this?
What is the formula for the Debt-to-Equity ratio?
In a Defined Contribution plan, the expense reported in the income statement is equal to: