Question - You are the Accounting Director for a medium size Chemical Company and one of your responsibilities is accounting for the Company's defined benefit pension plan. The preliminary Plan Status as of December 31, 2014 was as follows:
Early in 2015, the Chief Financial Officer calls you into his office and tells you he just had a conversation with the actuary and the final Plan asset valuation for 2014 is only $85 million because of the poor stock market performance. The actuary also told the CFO that the $15 million loss would not affect the 2014 externally reported income statement but would certainly affect earnings in 2015 and in future years as well.
The CFO's question to you is - will the whole $15 million need to be recognized against 2015's income or can it be spread over future periods? He also tells you he is a little confused as to how the FASB 87 rules work and would like an overall presentation on pension accounting as well as how the $15 million will impact current and future income.
Prepare a research paper on how the pension accounting rules work as well as how the $15 million actuarial loss will be accounted for.