- CFA Exams
- CFA Level I Exam
- Study Session 8. Financial Reporting and Analysis (3)
- Reading 28. Non-current (Long-term) Liabilities
- Subject 10. Defined Contribution and Defined Benefit Pension Plans
CFA Practice Question
Information regarding the defined-benefit pension plan of Tri Cities Transport included the following for 2015 ($ in millions):
Interest cost: 32
Actual and expected return on plan assets: 26
Amortization of unrecognized net gain: 3
Amortization of unrecognized prior service costs: 5
Retiree benefits paid (end of year): 50
Service cost: 48
Interest cost: 32
Actual and expected return on plan assets: 26
Amortization of unrecognized net gain: 3
Amortization of unrecognized prior service costs: 5
Retiree benefits paid (end of year): 50
What is Tri Cities' pension expense for 2015?
A. $56 million
B. $62 million
C. $98 million
Explanation: Service cost ($48) + interest cost ($32) - expected return on plan assets ($26) -amortization of unrecognized net gain ($3) + amortization of unrecognized prior service cost ($5) [in millions]
User Contributed Comments 4
| User | Comment |
|---|---|
| yxten1 | amortization of unrecognized net gain should be -ve. |
| somk | yxten1; tell me about. such questions made me insult myself the most. when I find out such stupid mistakes I shout "stupid" "damn" "shoot" with an "i". CFA is degrading my self-esteem. and am afraid am gonna get used to it |
| sriera | Virtual hug to you! somk |
| D3456 | Here are we assuming IFRS? I was under the impression under GAAP prior service costs were amortized over the life of the employees. Can anyone shed some light? |