Analyzing and Interpreting Pension and Health Care Footnote
Xerox Corporation reports the following pension and retiree health care (“Other”) footnote as part of its 10 K report.
a. Describe what is meant by service cost and interest cost (the service and interest costs appear both in the reconciliation of the PBO and in the computation of pension expense).
b. What is the acrualrerurn on the pension and the health care (“Other”) plan investments in 2012? Was Xerox’s profitability impacted by this amount?
c. Provide an example under which an “actuarial loss,” such as the $843 million loss in 20 12 that Xerox reports, might arise.
d. What is the source of funds to make payments to retiree s?
e. How much did Xerox contribute to its pension and health care plans in 2012?
f. How much cash did retirees receive in 20 12 from the pension plan and the health care plan? How much cash did Xerox pay these retirees in 2012?
g. Show the computation of the 2012 funded status for the pension and health care plans.
h A'The company reports $843 million “Net acruarial loss” in the table relating to other comprehensive income, a credit of $3 million relating to “Prior service credit,” a loss of$( 189) million relating to “Amortization of net actuarial loss,” and a credit of $23 million relating to “Amortization of prior service credit” in the net periodic benefit cost table. Describe the process by which these amounts are transferred from other comprehensive income to pension expense in the income statement.
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