- 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
Which of the following pension items is not capitalized?
II. Pension plan assets.
III. Unrecognized prior service costs.
I. Projected benefit obligation.
II. Pension plan assets.
III. Unrecognized prior service costs.
Correct Answer: I, II and III
None of them is capitalized.
User Contributed Comments 9
| User | Comment |
|---|---|
| katybo | PBO and Plan Assets are not recognized in the balance sheet, only the netting of both. Otherwise you would increase assets and liabilities affecting ratios. I think unrecognized prior service costs are amortized over the remaining service life, it does not affect current pension expense. |
| jkc2007 | why? |
| bmeisner | Good question. I thought prior service costs were capitalized and then amortized but the "unrecognized" throws me off on that one. |
| josepe | Agreed. FAS 87 requires prior service cost, not unrecognized ..., be amortized over remaining service life of employeees. |
| Nightsurfer | None are capitalized. Only the prepaid/unfunded status is capitalized. |
| dblueroom | what does capitalized mean again? can you capitalize a liability? I think funded status recognize "Unrecognized prior service costs" in full under the new standard. That's why the new standard usually causes increase in liability, because it's more conservative. josepe, you are talking about Income Statement affect of unrecognized prior items. |
| dblueroom | I think this question is to test that neither of the three is individually recognized on the B.S. only funded status. |
| quanttrader | only funded status of pension on balance sheet. |
| davidt876 | completely agree dblueroom |