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Air Canada: Defined Benefit Pension Plans
內容大綱
An investor was reviewing his investment in Air Canada to decide whether or not to sell his shares in the company. Recent weakness in the airline industry and a three-day strike by service staff had caused the investor to reevaluate Air Canada’s long-term prospects. In particular, the investor wanted to consider the company’s pension plans in his analysis. A proposal to move new hires to defined contribution from defined benefit pension plans was a key point of contention between the company and striking workers. The investor knew the company’s pension plans were underfunded and he wanted to assess what impact the underfunding would have on the company’s future. Finally, the investor wanted to understand the impact that the change to International Financial Reporting Standards would have on Air Canada’s pension accounting.
學習目標
The case involves assessing a company’s financial health to make an investment decision. A key issue is the health of the company’s defined benefit pension plans. The case is designed to introduce students to the details of pension accounting for a firm where pensions are significantly underfunded. Air Canada can be used to facilitate teaching of pension accounting in detail or can be used for a more general discussion on the impact of pension plans on investment decisions. It can be used in an intermediate or advanced course in financial accounting or reporting at the undergraduate or graduate level. The case also covers the impact of the adoption of International Financial Reporting Standards on pension accounting.