- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 8. Topics in Long-Term Liabilities and Equity
- Subject 5. Financial Reporting for Post-Employment and Share-Based Compensation Plans
CFA Practice Question
Company incentives for using a defined contribution pension plan instead of a defined benefit plan include ______.
II. a tax exemption for pension investment earnings
III. potential for earnings management
IV. a paternalistic attitude to employees, since the employer maintains all obligation risks
I. the fact that the employer has no future liability beyond contributions
II. a tax exemption for pension investment earnings
III. potential for earnings management
IV. a paternalistic attitude to employees, since the employer maintains all obligation risks
Correct Answer: I only
User Contributed Comments 3
| User | Comment |
|---|---|
| davidt876 | II - applies to both defined contribution and benefit, so it's not an incentive to use one over the othe |
| UcheSam | @davidt876 II only applies to Defined Benefit Plant as Defined Contribution Plan does not have pension investment earnings. Pension contributions are expense in the period services was earned, although tax deductible. |
| nik24 | Why not III ? Since, it can be used as a tool manage net income |