Accounting

Running head : PENSION FUND ANALYSIS : GERMANY (VOLKSWAGEN

Pension Funds Analysis

Germany (Volkswagen (Name

Accounting (Date )Highlights of the German Pension Fund

There is a legal separation between the employer and the pension institution with the German pension fund . It offers lifelong retirement benefits . The coverage of biometric risks - and not merely its function as an investment instrument - was one of the social requirements emphasized by the European Parliament but not adopted in the final draft

The plan guarantees participants a right to their benefits guarantees , a compulsory redemption of

contributions , thus the employer guarantees the payment of the retirement benefits in the event that the pension fund should be bankrupted

Members will benefit from timely and accurate disclosure of information

The activities are subject to the monitoring of the Germany Supervisory Authority

Recognition has been given to trying to create a level playing field amongst service providers . The pension fund is the only financing instrument for which the complete subcontracting of biometric risks asset management and administration is possible

The tax features make it attractive . The German Government adopted the recommendation on tax relief to contributions as well as the deductibility of pension costs as a business expense . The pension plan makes it easier for internationally mobile employees to transfer their pension rights

I selected German Volkswagen Company and analyzed its pension plan ) according to its annual balance sheet . Volkswagen places pension benefits under the liabilities column on the balance sheet . The pension benefits plans are under-funded according to the balance sheet

How Volkswagen Accounts for Pension Provisions Financial Reporting

PENSION PROVISIONS

The actuarial valuation of pension provisions is based on the projected unit credit method in

respect of defined benefit plans in accordance with IAS 19 . The valuation is based not only on

pension payments and vested entitlements known at the balance sheet date , but also reflects

future salary and pension trends . Actuarial gains and losses are recognized directly in equity

net of deferred taxes

PROVISIONS FOR TAXES

Tax provisions contain obligations resulting from current taxes Deferred taxes are presented in

separate items of the balance sheet and income statement

DEFERRED TAXES

Deferred tax assets are generally recognized for taxable temporary differences between the tax

base of assets and their carrying amounts in the consolidated balance sheet , as well as on tax

loss carry forwards and tax credits provided it is probable that they can be used in future periods

Deferred tax liabilities are generally recognized for all taxable temporary differences between

the tax base of liabilities and their carrying amounts in the consolidated balance sheet

Deferred tax liabilities and assets are recognized in the amount of the expected tax liability

or tax benefit , as appropriate , in subsequent fiscal years , based on the expected enacted tax rate

at the time of realization . The tax consequences of dividend payments are not taken into account

until the resolution on appropriation of earnings available for distribution has been adopted

Deferred tax assets that are unlikely to be realized within a clearly...