RABBI TRUST Definition

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RABBI TRUST is a nonqualified deferred compensation plan whereby an employer and employee agree to defer payment for the employees services until a specified future date. The rabbi trust features an irrevocable grantor trust that is set up by the employer to hold the contributions set aside for the employee. While this provides the employee some degree of safety that the money will be available when desired, the terms of the trust must be such that exposes the trust assets to the claims of the employers creditors.

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UNDERABSORBED OVERHEAD is where total overhead has not been fully allocated to products sold or services offered. Such a condition can result in an understatement of COGS or cost of sales.

COMPENSATING ERROR is the name given to the situation where one mistake cancels out the effect of a second mistake.

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