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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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What are the five possible alternative methods of determining the extent of a company’s pension plan liability? Which one is required by GAAP?

To determine

Explain the five possible alternatives method to determine the pension plan liability and identify the alternative that is required by GAAP.

Explanation

Pension plan: Pension plan is the plan devised by corporations to pay the employees an income after their retirement, in the form of pension.

Explain the five possible alternatives method to determine the pension plan liability and identify the alternative that is required by GAAP as follows:

There are five alternatives to recognize the pension plan liability. They are,

  • Employer contribution to the pension fund based on the actuarial funding method: The employer has an obligation to contribute the pension plan rather than directly to employees.
  • Recognition of total pension fund till the employee service period: The employer’s pension obligation would arise till the employee service period as this is the method adopted by the FASB...

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