The Current Effects of IFRS on the Pension Reporting for Coca-Cola and PepsiCo at 2009 Year-End
Speaking about Coca-Cola and PepsiCo companies, it is necessary to mention that these are powerful and financially well-developed organizations. They are global competitors that struggle constantly for being the first and the best in the world market. Indeed, these two are ferocious to each other. Both companies propose varying pension plans. First of all, let us give the definition of pension. The pension is a steady income that a person gets on retirement.
As to Coca-Cola Company, it has chosen cash balance plans design of benefit plans. According to statistics of 2009, Coca-Cola became the third that adapted cash balance plan. Operating revenue in 2009 was $31.9 billion, which was higher than in 2008. Career average pay is increasing faster, compared with the previous years. Coca-Cola Company uses pension-funding reforms that ensure the new cash flow system. The employees do not feel the fear of the litigation and discrimination threat.
PepsiCo Inc. is constantly in search of new pension projects. It is planning to offer beginners a final salary pension in order to shorten the level of workforce mobility. Without a doubt, the company wants to provide a good and secure retirement. Comparing to Coca-Cola, PepsiCo Inc. has positive working capital and reliable ability to pay off its short-term liabilities.
Undoubtedly, International Financial Reporting Standards (IFRS) has the effect on the pension reporting for Coca-Cola and PepsiCo. IFRS invokes the companies to develop varying pension plans, defending the rights of employees. Internalization of business activity is also the actions of IFRS. IFRS makes the quality of the pension higher, reporting for such companies as Coca-Cola and PepsiCo, and reduces perceived accounting risk.
Accounting and reporting about the pension is realized on the basis of International Financial Reporting Standards. IFRS defines the following benefits of employees: salaries, wages, paid annual leave, retirement benefits, termination payments, etc. All these assets influence the level of pension of the employee, and that is why it is important to report about them to the pension fund.
In conclusion, it is necessary to note that Coca-Cola and PepsiCo are global competitors that struggle constantly for being number one in the market. Certainly, they are fierce rivals. Both companies propose varying pension plans. Coca-Cola Company has chosen cash balance plans design of benefit plans, while PepsiCo Inc. is constantly on a lookout for new pension projects. They are planning to offer beginners a final salary pension in order to shorten the level of workforce mobility. However, now they have a non-contribution pension plan. International Financial Reporting Standards has the effect on the pension reporting for Coca-Cola and PepsiCo. IFRS invokes the companies to develop varying pension plans. It defends the rights of employees.
The Funding Levels and Capital Gains Experienced by Coca-Cola and PepsiCo in Their Respective Pension Funds
Speaking about respective pension funds of Coca-Cola, it is worth mentioning that a good proposition of pension plan will benefit not only employees but also the entire company. Growth prospects and strong profitability increase pension funds. One can estimate industry of Coca-Cola in $80 billion. Pension fund should have $1 billion. It is worth noting that Coca-Cola Company includes 174, 000 employees, and they all want to get their pension.
Pension plan of Coca-Cola is a contribution plan that concerns all employees, even international ones. One can calculate an individual pension plan, taking into consideration one's contribution and input of the employer. Employees pay tax benefits to pension funds, and the employer does the same. Despite that fact that Coca-Cola improved the contribution pension plan, the employees considered it unfunded and unqualified.
Coca-Cola Company invested $1 billion in pension plans. Let us see the new targets of this company that will influence their part of investment for the pension fund. Equities are 42%, fixed income is 30% and alternatives are 28%.
The pension plan of Coca-Cola Company is also called benefit pension plan. It is a tax-qualified plan that provides all employees of the company with basic pension benefits. It is calculated according to 1.15% of the final average payment, and the number of working years. Benefit pension plan can also consist of the different forms, such as vesting, normal retirement, and early retirement.
Unlike Coca-Cola, PepsiCo, Inc., has chosen a voluntary pension plan. Of course, it is a non-contributory plan. It means that the only employer is the contributor in the pension fund, and he pays taxes and the entire cost of this plan accordingly. The employees suppose it to be more profitable than contribution ones. The taxes of this plan are calculated on the basis of incomes during a year. PepsiCo also proposes life insurance and medical benefits. It is not funded by the employer, but it is funded by employees.
Pension plans of PepsiCo, Inc. concern full-time employees and some category of international employees. PepsiCo also proposes medical and life insurance to their representatives.
To my mind, a contribution pension plan is safer than non-contribution, as it guarantees the financial reliability in the future. I suppose that Coca-Cola's pension plan is more reliable. The union of employees and employer in building pension fund will work more effectively. The given pension plan really helps individuals to save money for retirement. When a person invests the part of his money, he will earn in the future.
The advantages of a contribution pension plan are the following: providing of safe future for the retiring employees, and financial commitment for Coca-Cola Company. As to non-contribution pension fund, it is not so reliable as contribution one, since the only employer invests in it.
Conclusions
As mentioned above, Coca-Cola and PepsiCo are global competitors that constantly compete for being the best in the world market. Both companies propose varying pension plans. While Coca-Cola Company has chosen cash balance plans design of benefit plans, PepsiCo Inc. is regularly seeking to find new pension strategies.
Pension plan of Coca-Cola is a contribution plan that concerns all employees, even international ones. One's pension plan can be calculated by taking into account the contributions of both employer and employee. They both pay tax benefits to pension funds. Despite that fact that Coca-Cola enhanced the contribution pension plan, the employees supposed it unfunded and unqualified.
In turn, PepsiCo, Inc., has chosen a non-contributory voluntary pension plan. It means that the only contributor to the pension fund is the employer, who pays taxes and the overall cost of this plan. The employees suppose it to be more profitable than contribution ones. The taxes of this plan are calculated on the basis of incomes during a year. PepsiCo also proposes life insurance and medical benefits. Hence, it is not funded by the employer, but by employees.
To my mind, a contribution pension plan is safer than non-contribution, as it guarantees the financial reliability in the future. I suppose that Coca-Cola's pension plan is more reliable. The union of employees and employer in building pension fund will work more effectively. The pension plan really helps individuals to save money for retirement. When a person invests the part of his money, he will earn in the future.
References:
- Jakaye, J. (2013). The Difference in a Non-Contributory and a Contributory Retirement Plan. eHow, Demand Media, Inc.
- The Coca-Cola Company Pension Plan Single-Employer 401(k) Plan. (2013). FindTheBest.
