CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

On January 1, 2011, DeSoto Industries' accumulated postretirement benefit obligation was $75 million. Retiree benefits of $9 million were paid at the end of 2011. Service cost for 2011 is $21 million.

Estimates and assumptions regarding future health care costs were revised in 2011, causing the actuary to revise downward the estimate of the APBO by $2 million. The actuary's discount rate is 8%. There were no unrecognized postretirement benefit costs at the end of 2011.

What is the accumulated postretirement benefit obligation at December 31, 2011?
A. $91 million.
B. $93 million.
C. $100 million.
Explanation: The APBO ($75) is increased by the service cost ($21) and the interest expense ($6 = 8% x 75), and decreased by the benefits paid ($9) and the estimation revision ($2) [in millions].

User Contributed Comments 2

User Comment
volkovv Good question.
Hishy Agreed.
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