You are an accountant for the Lanthier Company. The president of the company calls you into the...

Question

You are an accountant for the Lanthier Company. The president of the company calls you into the office and says, ?oWe have to find a way to reduce our pension costs. They are too high and they are making us uncompetitive against our foreign competitors whose employees have state-funded pensions. I think we might have to abandon our defined benefit plan, but I know the employees would not be happy about that. I was also thinking that perhaps we could raise the discount rate we use up to the high end of the acceptable range. I also think we need a trustee who will pursue a more aggressive investment strategy for the pension funds; that way we can raise our expected rate of return.??
Required
From financial reporting and ethical perspectives, discuss the issues raised by this situation.

Robert · Accepted Answer

In the present case ethical issue is that management of Lanthier Company wants to 
abandon defined benefit pension plan because it is offering competitive disadvantage to Lanthier 
Company and also it has become burdensome for Lanthier Company to carry this post-retirement 
plan. Now the management has two suggestions to reduce the impact of this burden, following 
are those tow suggestions:- 
1) Appoint a trustee to pursue investments more aggressively so that the investment 
made under retirement plans will earn sufficient rate of returns and the funds will be effectively 
managed. 
2) Increase the discount rate to the high end of acceptable range,

You are an accountant for the Lanthier Company. The president of the company calls you into the office and says, ?oWe have to find a way to reduce our pension costs. They are too high and they are...

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