A government offering a defined benefit pension plan changes the plan terms with the result that pension benefit are increased. 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.

Question

Quizplus · Accepted Answer

Changes in the terms of a pension plan are to be recognized in the period in which the terms changed. A change that increases pension benefits results in an increase in pension expense and pension liability in the year of the change.

A Government Offering a Defined Benefit Pension Plan Changes the Plan