According to SFAS No.87,"Employer's Accounting for Pensions," gains and losses should be

Question

Quizplus · Accepted Answer

According to SFAS No. 87, gains and losses should be allocated if any unrecognized gain or loss at the beginning of the year is in excess of 10 percent of the greater of the projected benefit obligation or the market value of the plan assets. This method is known as the corridor approach. The purpose of the corridor approach is to prevent insignificant gains and losses from affecting the financial statements while ensuring that significant gains and losses are recognized over time. Therefore, option C is the best choice. Options A and B are not correct because they do not consider the corridor approach when allocating gains and losses. Option D is not correct because disclosure alone is not sufficient for accounting for a pension.