An advantage of the immediate recognition approach is that

Question

Quizplus · Accepted Answer

The immediate recognition approach recognizes all actuarial gains and losses in the year they occur, which means the Net Defined Benefit Liability/Asset account reflects the actual funded status of the pension plan. This provides a more accurate representation of the financial health of the plan. The other options are disadvantages of the approach: B) unrecognized past service costs create a mismatch between the pension expense and the actual costs incurred, C) averaging out the pension expense can lead to volatility in reported earnings, and D) not recognizing actuarial gains and losses can also lead to volatility in reported earnings.

An Advantage of the Immediate Recognition Approach Is That