Pension expense: Pension expense is an expense to the employer paid as compensation after the completion of services performed by the employees.
Projected benefit obligation (PBO): This is the estimated present value of future retirement benefits, accumulated based on the future compensation levels.
Plan assets: The assets which are used to satisfy the postretirement obligation are held as a pension fund by the trustee, to invest the employer contributions,
Funded status: The net difference of the total of projected benefit obligation (PBO) and pension plan assets are referred to as funded status. If the balance of PBO is more than plan assets, the difference is referred to as underfunded status, and reported as net pension liability on the balance sheet. If the balance of plan assets is more than PBO, the difference is referred to as overfunded status, and reported as net pension asset on the balance sheet.
To define: The affect of pension expense on the funded status of the plan.
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INTERMEDIATE ACCT.CUSTOM W/CONNECT
- Which of the following is not a component of pension expense? a. amount funded b. service cost c. expected return on plan assets d. interest costarrow_forwardwhat are the key accounting issues in determining the method of accounting for defined benefit pension plansarrow_forwardWhat factors determine whether a pension plan is adequately capitalized or excessively capitalized?arrow_forward
- How should gains or losses related to pension plan assets be recognized? How does this treatment compare to that for gains or losses related to the pension obligation?arrow_forwardWhat exactly does "previous service cost" mean? When is past service cost recognized as a pension expenditure and how is it calculated?arrow_forward
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