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econheypt01
accounting_question.docxInstructions:
Please answer the following question in a minimum of 500 words. Be sure to include 2 citations.
Question:
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General Motors Corp. will record a $170 million charge due to increases in retirement benefits for hourly United Auto Workers employees. The charge stems from GM's new tentative labor contract with the UAW. According to a filing with the Securities and Exchange Commission, the charge amounts to 22 cents a share and is tied to the earnings of GM's Hughes Electronics unit. The company warned that its “unfunded pension obligation and pension expense are expected to be unfavorably impacted as a result of the recently completed labor negotiations.” |
Taking advantage of an employee stock purchase plan, Charles has become an active GM stockholder as well as employee. His stockholder side is moderately concerned by the article's reference to the unfavorable impact of the recently completed labor negotiations.
Required:
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1. |
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When a company modifies its pension benefits the way General Motors did, what name do we give the added cost? How is it accounted for? |
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2. |
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What does GM mean when it says its “unfunded pension obligation and pension expense are expected to be unfavorably impacted as a result of the recently completed labor negotiations”? |
