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.

Question

Quizplus · Accepted Answer

Changes in the net pension liability resulting from changes in estimates actuarial assumptions) are not immediately recognized in pension expense. Rather they are deferred and recognized in expense over the average remaining service life of the plan's employees.

A Government Offering a Defined Benefit Pension Plan Determines It