CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

Which of the following pension items is not capitalized?

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
You need to log in first to add your comment.