On January 1 of the current year, a firm's defined benefit pension plan is amended to increase
Question:
On January 1 of the current year, a firm's defined benefit pension plan is amended to increase the benefits for service already provided by employees through that date. The resulting immediate increase in projected benefit obligation (PBO) is $5mn at January 1.The average remaining service period of employees covered by the amendment is ten years. Select the correct statement about the effects of this prior service grant.
a. The increase in PBO is gradually recorded over ten years.
b. Pension liability is gradually increased over ten years.
c. Pension expense for the current period is not affected.
d. Other comprehensive income is immediately decreased by $5mn on January 1.
South Western Federal Taxation 2016 Corporations Partnerships Estates and Trusts
ISBN: 9781305399884
39th edition
Authors: James Boyd, William Hoffman, Raabe, David Maloney, Young