Winston Corporation had a defined benefit obligation of €3,500,000 and plan assets of €3,000,000 at January 1, 2012.Winston's unrecognized net pension loss was €615,000 at that time.The average remaining service period of Winston's employees is 5 years.What is Winston's minimum amortization of pension loss?

Question

Quizplus · Accepted Answer

The minimum amortization of pension loss is calculated using the corridor approach. The corridor is 10% of the greater of the defined benefit obligation (€3,500,000) or plan assets (€3,000,000), which is €350,000. The excess of the unrecognized net pension loss (€615,000) over the corridor (€350,000) is €265,000. This excess is amortized over the average remaining service period of 5 years, resulting in an annual amortization of €53,000.

Winston Corporation Had a Defined Benefit Obligation of €3,500,000 and Plan