CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

Which of the following transactions results from a firm's attempt to smooth income statement effects associated with pensions?
A. Amortization of prior service cost.
B. Computation of the corridor.
C. Recognition of service cost.
Explanation: Prior service costs result when plans are amended. The costs are amortized into pension expense over the expected service lives of employees expected to receive plan benefits, and not recognized immediately at the amendment date. This procedure is an example of income smoothing.

User Contributed Comments 0

You need to log in first to add your comment.