- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 11. Employee Compensation: Post-Employment and Share-Based
- Subject 3. Analysis of Pension Plan Disclosures
CFA Practice Question
Information regarding the defined-benefit pension plan of Pauline Products included the following for 2011 ($ in millions):
Accrued pension cost: 2.
December 31:
Projected benefit obligation (PBO): 85.
Accumulated benefit obligation (ABO): 75.
Plan assets: 50.
Pension expense: 8.
January 1:
Accrued pension cost: 2.
December 31:
Projected benefit obligation (PBO): 85.
Accumulated benefit obligation (ABO): 75.
Plan assets: 50.
Pension expense: 8.
No contributions were made to the pension plan assets during 2011. At December 31, 2011, what amount should Hall record as additional pension liability?
Correct Answer: 15 million
The minimum liability is $25 ($75 - 50), and the accrued pension cost is $10 ($2 + $8) [in millions].
User Contributed Comments 3
| User | Comment |
|---|---|
| danlan2 | end of year pension cost=begin of year pension cost+pension expense |
| HenryQ | Good question. Should always consider prepaid/accrued items. |
| quanttrader | additional pension liability = minimum liability (ABO-assets) -accrued liability |