When a pension plan is amended to recognize previous service of currently enrolled employees,what component of pension expense is created?

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Quizplus · Accepted Answer

When a pension plan is amended to recognize previous service of currently enrolled employees, this creates prior service costs. Prior service costs relate to changes in a pension plan's benefit formula that apply to employee service prior to the plan amendment. Prior service costs are recognized as a component of pension expense and are typically amortized over the remaining service life of the affected employees.

When a Pension Plan Is Amended to Recognize Previous Service