Prior service cost is amortized into pension expense on a straight-line basis over the remaining service lives of the employees who will be receiving benefits from the plan.

Question

Quizplus · Accepted Answer

Prior service cost is the cost of providing retroactive benefits to employees for past service that was not covered by the pension plan. This cost is recognized as an expense in the period of plan amendment, but it is amortized into pension expense on a straight-line basis over the remaining service lives of the employees who will be receiving benefits from the plan. Therefore, the statement is true.

Prior Service Cost Is Amortized into Pension Expense on a Straight-Line