Assume that at the beginning of the current year, a company has a net gain-AOCI of $25,000,000. At the same time, assume the PBO and the plan assets are $200,000,000 and $150,000,000, respectively. The average remaining service period for the employees expected to receive benefits is 10 years. What is the amount of amortization to pension expense for the year?

Question

Quizplus · Accepted Answer

The amortization of net gain-AOCI is calculated by dividing the net gain by the average remaining service period: $25,000,000 / 10 = $2,500,000. However, the corridor approach is used to determine the minimum amortization amount, which is 10% of the greater of PBO or plan assets. Here, 10% of PBO ($200,000,000) is $20,000,000. Since $25,000,000 is greater than $20,000,000, the excess is $5,000,000, and dividing by 10 years gives $500,000.

Assume That at the Beginning of the Current Year, a Company