The Coca-Cola Company and PepsiCo Pension Plans
Intermediate Accounting III – ACC 305
November 20, 2011
The Coca-Cola Company and PepsiCo are both very large manufacturing corporations that operate worldwide. Over the years, each corporation has had a very longevity of business success. The expansion of business and brands through subsidiaries, partnerships and franchises in beverage and food products has been a consistent growth in retail sales for both corporations. With such growth, they employ thousands of employees worldwide and offer competitive benefits to include medical, life, and retirement. In 2006, both corporations adopted SFAS ...view middle of the document...
Internationally, the corporation offers a variety of pensions and postretirement plan arrangements as well to those employees who qualify. According to the consolidated final statement note 16, 2007 year-end, The Coca-Cola Company’s net periodic cost was $108 million. The total periodic cost recognized was $113 million which included settlement cost of $3 million and $2 million in curtailment cost. The funded status for its pension and postretirement plans was ($89) million which has been calculated using the difference between the fair value of the asset plan amount of $3,428 million and the projected benefit obligation amount of $3,517 million. The rate of increase in compensation levels of 4.25 percent and the discount rate of 6.00 percent were the weighted-average assumptions used in calculating the benefits obligations. For the period of 2008, anticipation of benefit payments of approximately $40 million are expected to be paid where a forecast of a $10 million reduction to follow each following year at that rate until the year 2032 (The Coca-Cola Company, 2008).
PepsiCo offers its U.S. and some International employees who met eligibility requirements, a defined contribution plan where PepsiCo is the primary contributor and their employee’s participation is elective. The contribution by PepsiCo is determined by the employee’s income and time of service. There are also plans that are non-funded available as well. According to the 2007 annual report, the year-end net periodic cost was $18 million. The funded status for its pension and other associated retirement plans was ($266) million. This was determined by calculating the difference between the fair value of the asset plan amount of $5,782 million and the projected benefit obligation amount of $6,048 million. The weighted-average assumptions used in calculating the benefits obligations were the rate of increase in compensation levels of 4.50 percent and the discount rate of 5.70 percent. There is an expectancy of an estimated $150 million in benefit payments for 2008 with an increase of those payments annually (PepsiCo, 2008).
Although both The Coca-Cola Company and PepsiCo are...