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Pension Accounting at AT&T
Hopkins, Justin J. Exercise C-2391 / Published March 13, 2017 / 16 pages.
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This exercise is taught in a Darden first-year elective, "Financial Reporting," as the second half of a module covering Managerial Accounting for Pension Plans, but would also work well in a first-year MBA core accounting course. It was designed to be taught as a follow-up case to "Accounting for Defined Benefit Pension Plans for Caperton Corporation" (UVA-C-2375), although it can be taught alone. This exercise provides students the opportunity to analyze the pension footnote disclosures for AT&T Inc. In particular, it focuses on the components of pension expense, the balance sheet accounts, and the various assumptions that drive these figures. What is most unique about the example is that the exercise is set in 2008, and in 2010, AT&T elected to immediately recognize actuarial gains and losses in net income. To provide comparable prior year financial statements, AT&T restated 2008 accounting for immediate recognition of actuarial gains and losses. Therefore, students can see the significant effect of this change in accounting policy by comparing the $12.8 billion in net income originally reported in 2008 with the $2.3 billion loss AT&T reported for the restated 2008.




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  • Overview

    This exercise is taught in a Darden first-year elective, "Financial Reporting," as the second half of a module covering Managerial Accounting for Pension Plans, but would also work well in a first-year MBA core accounting course. It was designed to be taught as a follow-up case to "Accounting for Defined Benefit Pension Plans for Caperton Corporation" (UVA-C-2375), although it can be taught alone. This exercise provides students the opportunity to analyze the pension footnote disclosures for AT&T Inc. In particular, it focuses on the components of pension expense, the balance sheet accounts, and the various assumptions that drive these figures. What is most unique about the example is that the exercise is set in 2008, and in 2010, AT&T elected to immediately recognize actuarial gains and losses in net income. To provide comparable prior year financial statements, AT&T restated 2008 accounting for immediate recognition of actuarial gains and losses. Therefore, students can see the significant effect of this change in accounting policy by comparing the $12.8 billion in net income originally reported in 2008 with the $2.3 billion loss AT&T reported for the restated 2008.

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