@WestonM – If the plan is overfunded we have a noncurrent asset. If the plan is underfunded, we have a liability; current versus noncurrent treatment is as follows:
If the current amount due is more than the benefit plans assets, we have a current liability to the extent that the plan assets will not cover the current amounts.
If the PBO is more than the plan's assets, but the current amount due is either not given or is less than the plan's assets, the difference is a noncurrent liability.
Examples:
Scenario 1 – PBO $1,000 of which $200 is expected to be paid next year. Plan assets – $500
Scenario 2 – PBO $1,000 of which $200 is expected to be paid next year. Plan assets – $100
Scenario 2 – PBO $1,000 of which $200 is expected to be paid next year. Plan assets – $2,000
Scenario 1 – noncurrent liability of $500
Scenario 2 – current liability of $100 and noncurrent liability of $800
Scenario 3 – noncurrent asset of $1,000
Additional Info:
+ Overfunded pension plans are NEVER classified as a CURRENT asset only noncurrent.
+ If a firm has multiple plans (ie: Plan A, Plan B, etc.) they must disclose the pension plan asset/liability separately, they DO NOT net these.
Hope this helps!
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