In Computing the Service Cost Component of Pension Expense, the IASB

question 69

Multiple Choice

In computing the service cost component of pension expense, the IASB concluded that

• A)the accumulated benefit obligation provides a more realistic measure of the pension obligation on a going concern basis.
• B)a company should employ an actuarial funding method to report pension expense that best reflects the cost of benefits to employees.
• C)the defined benefit obligation using future compensation levels provides a realistic measure of present pension obligation and expense.
• D)All of these answer choices are correct.

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Definitions:

Financial Statements

Formal records of the financial activities and position of a business, individual, or other entity, typically including the balance sheet, income statement, and statement of cash flows.

Time-Series Analysis

A statistical method used to examine and interpret a sequence of data points, collected over a period of time, to identify trends or patterns.

Return On Equity

A measure of a corporation's profitability that reveals how much profit a company generates with the money shareholders have invested.

Du Pont Model

The Du Pont Model is a framework for analyzing a company's return on equity (ROE) by breaking it down into three components: profit margin, asset turnover, and financial leverage.