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Basic Question 8 of 24
In an employer-sponsored defined benefit pension plan, the interest cost included in the pension expense represents:
B. The increase in the projected benefit obligation due to the passage of time.
C. The increase in the fair value of plan assets due to the passage of time.
A. The effective discount rate times the unamortized balance of prior service costs.
B. The increase in the projected benefit obligation due to the passage of time.
C. The increase in the fair value of plan assets due to the passage of time.
User Contributed Comments 2
| User | Comment |
|---|---|
| HenryQ | It is calculated as discount rate * beg. PBO. |
| johntan1979 | To be more precise, it's prior period discount rate. |
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Learning Outcome Statements
explain and calculate measures of a defined benefit pension obligation (i.e., present value of the defined benefit obligation and projected benefit obligation) and net pension liability (or asset);
describe the components of a company's defined benefit pension costs;
explain and calculate the effect of a defined benefit plan's assumptions on the defined benefit obligation and periodic pension cost;
CFA® 2025 Level II Curriculum, Volume 2, Module 11.