- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 11. Employee Compensation: Post-Employment and Share-Based
- Subject 2. Accounting for Defined Benefit Plans
CFA Practice Question
Under the U.S. GAAP, prior service costs due to a pension plan amendment are expensed in the year the amendment occurred. True or False?
Correct Answer: False
The cost of any retroactive benefits (prior service cost) is deferred and amortized over future periods using the years-of-service method.
User Contributed Comments 3
| User | Comment |
|---|---|
| dream007 | Analyst notes, common. This is only true for US GAPP. Prior service cost is expenses in the year it is recognized under IFRS. |
| birdperson | is what dream007 said true or false? |
| daverco | From the curriculum text: Under IFRS, service costs (including both current service costs and past service costs) are recognised as an expense in P&L Under US GAAP, reported under OCI and amortized to P&L over the life of affected employees. |