CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

All of the following are ways in which management can boost earnings, as a result of pension computations, except:
A. Invest in more aggressive assets in order to earn a higher return.
B. Increase the discount rate used to compute present pension obligation, or reduce the rate at which wages are estimated to grow.
C. Increase the level of return expected to be earned on plan assets.
Explanation: Actual returns on pension assets do not enter in the accounting computation of pension expense. Instead, for reporting purposes, only the expected rate of return is used. Hence, even realizing higher than expected returns on plan assets, will not affect the firm's pension expense, at least in the short-run.

User Contributed Comments 1

User Comment
JChewL2 this is GAAP, not IFRS
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