The Projected Returns Exceed Actual Returns on Pension Plan Assets

question 2

Multiple Choice

The projected returns exceed actual returns on pension plan assets for a government offering a defined benefit pension plan. How would the resulting increase in the net pension liability be recognized in the financial statements in the year this difference is recognized?

• A) The increase in net pension liability would be expensed in the period the plan is changed.
• B) The increase in net pension liability would be deferred and amortized over the remaining service life of the employees.
• C) The increase in net pension liability would be deferred and amortized over five years.
• D) The increase in net pension liability would be deferred and amortized over ten years.

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Definitions:

Configural Model

Asch’s Gestalt-based model of impression formation, in which central traits play a disproportionate role in configuring the final impression.

First Impressions

Initial judgments and perceptions formed about an individual upon meeting, which significantly influence future interactions.

Asch

Refers to Solomon Asch, a psychologist known for conducting experiments on conformity, demonstrating how social pressure can influence individual judgment.

Cognition

The cognitive activity of gaining information and comprehension via thinking, experiencing, and sensory perception.