Pension Plan Reporting, International Flashcards
Pension Plan Reporting, International
A firm is applying international accounting standards to its defined-benefit pension plan and has pension gains and losses. As a result,
The gains and losses are gradually recognized in defined benefit obligation.
The gains and losses are never recognized in defined benefit obligation.
The firm’s earnings will not be affected.
The gain and losses will be amortized gradually in pension expense.
The correct answer is:
The firm’s earnings will not be affected.
Pension gains and losses are recognized immediately and in full in accumulated other comprehensive income. However, they are not subsequently amortized to earnings.
A firm is applying international accounting standards to its defined-benefit pension plan. At the end of the current year, the actuary informs the firm that the plan has experienced an actuarial gain of $2mn. The average remaining service period of plan participants is ten years. Therefore,
Defined-benefit obligation does not reflect the decrease of $2mn immediately.
Pension expense will be reduced by $200,000 the following year.
Other comprehensive income is immediately increased.
The unrecognized net gain or loss account is immediately debited.
The correct answer is:
Other comprehensive income is immediately increased.
OCI is increased through the increase in pension gains/losses—OCI.
