A Government Offering a Defined Benefit Pension Plan Determines It

question 43

Multiple Choice

A government offering a defined benefit pension plan determines it is necessary to alter actuarial assumptions increasing the estimated cost of pension benefits. How would the resulting increase in the net pension liability be recognized in the financial statements in the year the plan is changed?

• 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:

Animal Behavior

The study of the various activities and interactions of animals, often in their natural environments.

Ethnocentrism

The act of evaluating other cultures according to preconceptions originating in the standards and customs of one's own culture.

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Cognitive shortcuts or rules of thumb that simplify decision-making processes, often used under conditions of uncertainty.