How many of the following four aspects of accounting for pension gains and losses contribute to the reduction in volatility of reported pension expense:

(1) use of corridor amortization as an acceptable method,

(2) gains and losses cancel,

(3) spreading the amount subject to amortization over the average remaining service period of plan participants,

(4) the use of expected return for component 3 of pension expense?

Question

Business

Skyler Guerrero

3 July, 11:37

How many of the following four aspects of accounting for pension gains and losses contribute to the reduction in volatility of reported pension expense:

(1) use of corridor amortization as an acceptable method,

(2) gains and losses cancel,

(3) spreading the amount subject to amortization over the average remaining service period of plan participants,

(4) the use of expected return for component 3 of pension expense?

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Answers (1)

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Anika Gonzales · Answer 1

The correct answer is 4.

Explanation:

Actuarial gains and losses are better understood in the context of global pension accounting. Except when specifically indicated, this definition refers to pension accounting under generally accepted accounting principles in the United States (GAAP). While the US GAAP and the International Financial Reporting Standards (IFRS) prescribe similar principles for measuring pension benefit obligations, there are key differences in the way in which the two standards inform the cost of pensions in the income statement, in particular the treatment of actuarial gains and losses.