Critics of SFAS No 87 argue that its requirements result in reporting pension expense that is volatile One of the factors causing volatility is changing the discount rate used to calculate service cost and the projected benefit obligation The FASB requires use of the settlement rate to discount pro...

Critics of SFAS No. 87 argue that its requirements result in reporting pension expense that is volatile.

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Critics of SFAS No. 87 argue that its requirements result in reporting pension expense that is volatile. One of the factors causing volatility is changing the used to calculate service cost and the projected benefit obligation. The FASB requires use of the “ settlement rate” to discount projected benefits.

Required:
a. What is the settlement rate?
b. Explain why the FASB chose the settlement rate to discount projected benefits.
c. What alternative rate, or rates, might be preferred by opponents of the settlement rate? Why?
d. Why might companies object to increased volatility of pension expense? Discuss. Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...

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a According to SFAS No 87 the discount rate used to calculate the projected benefit obligation the accumulated benefit obligation vested benefits serv...View the full answer

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Question Posted: Dec 17, 2014 10:25 AM

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Critics of SFAS No. 87 argue that its requirements result in reporting pension expense that is volatile.

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a According to SFAS No 87 the discount rate used to calculate the projected benefit obligation the accumulated benefit obligation vested benefits serv...View the full answer

Financial Accounting Theory and Analysis Text and Cases

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