[Sherrid]

Becker Chapter F6 Pensions question 5 of 19.

If the PBO is more than the FV of the plan assets amortization of the net transition asset will increase the

pension expense but in this question Becker subtracts the amount instead of increasing the expense it’s

decreased? I used SIRAGE and came up with an expense of $211,000 but Becker’s answer is $205,000.

I’m confused and need to know if I’m wrong in understanding this concept. Please help.

[Sherrid]

Back again. I just reread Becker's explaination which notes that amortization of a net transistion asset will decrease the pension expense (this makes sense) but I want to know how they can have an asset when their PBO is more than the FV of the plans assets- ? Please help.

[nuclear3579]

Sherrid,

You have a pension plan asset only if the Fair Value is greater than the PBO. It means the plan is worth more than the obligation, it's overfunded. You'll have a pension plan liability if the PBO is greater than the FV, meaning the obligation is more than what it's worth. That's an underfunded plan. Page F6-12 explains it in more detail.

Hope this helps,

BEC - 84
FAR - 71, 80
REG - 82
AUD - 78 - Passed! Done!

[Author]

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