Villa Company has experienced tough competition leading it to seek concessions from
Villa Company has experienced tough competition, leading it to seek concessions from its employees in the company’s pension plan. In exchange for promises to avoid layoffs and wage cuts, the employees agreed to receive lower pension benefits in the future. As a result, Villa amended its pension plan on January 1, 2010, and recorded negative unrecognized past service cost of €125,000. The average period to vesting for the benefits affected by this plan is 5 years. Compute unrecognized past service cost amortization for 2010. Discuss the impact of this amendment on Villa’s pension expense in 2010 and 2011.

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