Analyzing and Interpreting Pension Disclosures-Plan Assets and Cash Flow YUM! Brands Inc. discloses the following pension footnote in its 10-K report. Pension Plan Assets ($ millions) Fair value of plan assets at beginning of year Actual return on plan assets... Employer contributions.. Benefits paid..... Fair value of plan assets at end of year 2018 $864 (49) 13 (73) $755 a. How does the "actual return on plan assets" of $(49) million affect YUM!'s reported profits for 2018? b. YUM! Brands contributed $13 million cash to the pension plan investment account (asset) during the year. Which of the following is true? i. YUM! recognized the $13 million cash payment as a pension expense in 2018. ii. YUM! did not recognize the $13 million cash payment as a pension expense in 2018 because it is not tax deductible. iii. YUM! did not recognize the 13 million cash payment as a pension expense in 2018 because it relates to employees' service in prior periods. iv. YUM! did not recognize the $13 million cash payment as a pension expense in 2018 be- cause benefits of $73 million were paid to employees and that amount represents the pension expense. v. None of the above. c. YUM!'s pension plan paid out $73 million in benefits during 2018. How is this payment reported?
Analyzing and Interpreting Pension Disclosures-Plan Assets and Cash Flow YUM! Brands Inc. discloses the following pension footnote in its 10-K report. Pension Plan Assets ($ millions) Fair value of plan assets at beginning of year Actual return on plan assets... Employer contributions.. Benefits paid..... Fair value of plan assets at end of year 2018 $864 (49) 13 (73) $755 a. How does the "actual return on plan assets" of $(49) million affect YUM!'s reported profits for 2018? b. YUM! Brands contributed $13 million cash to the pension plan investment account (asset) during the year. Which of the following is true? i. YUM! recognized the $13 million cash payment as a pension expense in 2018. ii. YUM! did not recognize the $13 million cash payment as a pension expense in 2018 because it is not tax deductible. iii. YUM! did not recognize the 13 million cash payment as a pension expense in 2018 because it relates to employees' service in prior periods. iv. YUM! did not recognize the $13 million cash payment as a pension expense in 2018 be- cause benefits of $73 million were paid to employees and that amount represents the pension expense. v. None of the above. c. YUM!'s pension plan paid out $73 million in benefits during 2018. How is this payment reported?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:# Analyzing and Interpreting Pension Disclosures—Plan Assets and Cash Flow
**YUM! Brands Inc.** discloses the following pension footnote in its 10-K report.
### Pension Plan Assets ($ millions) - 2018
- Fair value of plan assets at beginning of year: $864
- Actual return on plan assets: $(49)
- Employer contributions: $13
- Benefits paid: $(73)
- Fair value of plan assets at end of year: $755
### Questions
**a.** How does the “actual return on plan assets” of $(49) million affect YUM!’s reported profits for 2018?
**b.** YUM! Brands contributed $13 million cash to the pension plan investment account (asset) during the year. Which of the following is true?
i. YUM! recognized the $13 million cash payment as a pension expense in 2018.
ii. YUM! did not recognize the $13 million cash payment as a pension expense in 2018 because it is not tax deductible.
iii. YUM! did not recognize the $13 million cash payment as a pension expense in 2018 because it relates to employees’ service in prior periods.
iv. YUM! did not recognize the $13 million cash payment as a pension expense in 2018 because benefits of $73 million were paid to employees and that amount represents the pension expense.
v. None of the above.
**c.** YUM!’s pension plan paid out $73 million in benefits during 2018. How is this payment reported?
### Explanation of Data
The table shows changes in the fair value of pension plan assets for the year 2018. It starts with the initial value, accounts for returns, contributions, and payouts, and ends with the final value of the assets.
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