[CPAHOPE]

Projected benefits obligation under pension plan exceeds fair value of plan assets by 40000 dollars at end of year. Here is the following journal entry:
Deferred pension cost 40k
Pension liability 40k

I thought it was
OCI 40K
Pension liability 40k

Also why is deferred pension cost an asset account?

[DS]

Is this from a MCQ question as it is unclear exactly what you are asking about. Generally there is no “Deferred pension cost” or “Pension liability” accounts in the company's records. Instead they maintain separate plan assets and PBO accounts and then determine the net asset or liability to report on the financial statements. There shouldn't be any journal entries to adjust the liability amount.

[CPAHOPE]

It was one of those adjustment simulation question. I do recall that PBO and Plan assets arent reported on the F/S but the difference is reported on the financial statements as either plan assets or liability.

[Professor Farnsworth]

Roger has a great way to remember this:
Calculating Pension Expense ( A-SPIDER ):
○ A mortization of Existing Net Obligation or Net Asset at Implementation
○ S ervice Cost ( + )
○ P rior Service Cost Amortization ( +/- )
○ I nterest Cost ( + )
○ D eferred Gain ( +/- )
○ E xcess Amortization of Deferred Gain/Loss ( +/- )
○ Actual R eturn on Plant Assets ( – )

Really helpful mnemonic, in general Roger's lectures are amazing and super intuitive. I can't recommend it enough!!

[CPAHOPE]

@professor i know how to compute pension expense but thank you

[Author]

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