In drafting the memo:
(a) You should explain the circumstances the company finds itself in.
(b) Address the requirements under GAAP for the discount rate and expected rate of return on plan assets based on the FASB’s Accounting Standards Codification. When discussing the GAAP requirements, you should cite the relevant subsections of the FASB Accounting Standards Codification by section/paragraph number. Make sure you locate the paragraphs of the codification (not just the definitions) that address the discount rate and the expected long-term rate of return on plan assets. Your primary guidance should be from the recognition and measurement sections (25-35) although you can cite the implementation guidance (section 55) to support the other guidance.
(c) Address whether in the current economic environment, using any of the assumptions suggested other than the 5% discount rate–8% expected rate of return assumption is feasible. Address whether it would be ethical to follow the golfing buddy’s suggestion and back into interest rates that the company can live with, i.e., that give the desired results. In this regard, you should discuss how much flexibility you think there might be in selecting these discount/return rate assumptions for the purposes of determining the PBO and pension expense and still remaining in compliance with GAAP

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