Final answer:
PAS 26 applies to the preparation of financial statements for both funded and unfunded retirement benefit plans. Defined contribution plans like 401(k)s are replacing traditional pension plans, with benefits including tax deferrals and portability. Pension funds are invested to grow and provide retirement payouts, and pensions may also be insured by the Pension Benefit Guarantee Corporation.
Step-by-step explanation:
The student is asking about the application of PAS 26, which relates to the preparation of financial statements for retirement benefit plans. The correct answer is that PAS 26 applies to 'd. The preparation of financial statements of a retirement benefit plan, whether funded or unfunded'. This accounting standard specifies how to account for and disclose retirement benefits in the financial statements of a retirement benefit plan. Defined contribution plans, such as 401(k)s and 403(b)s, have become more prevalent as a retirement savings vehicle. In these plans, both employers and employees contribute fixed amounts regularly, which are tax deferred and can be transferred if the employee changes employers, thereby avoiding some of the inflation costs associated with traditional pension plans.
Pension funds are designed to prepare for the retirement or disability of employees. The funds are managed well to grow through investments and assure a payout to the retirees or disabled employees who are no longer working for the company. Additionally, employers offering traditional defined benefit pensions must contribute to the Pension Benefit Guarantee Corporation to insure at least some level of benefits, even if the company goes bankrupt.