Q3. According to U.S. GAAP, companies must account for pension assets and the associated pension obligation in their financial

     statements. These could be reported in two ways. Method 1 is to report the values of the pension fund assets and liability

     separately on the balance sheet. Method 2 is to report a net amount for the difference between the value of the fund assets

     and the fund liabilities. Which of the following statements most accurately describes the requirements of U.S. GAAP?

A)   Companies are required to use Method 2.

B)   Companies may choose to use either method.

C)   Companies are required to use Method 1.

Q4. Prime Doors has recorded a net pension liability of $1.5 million on its balance sheet. According to current U.S. accounting

    standards, Prime Doors is required to:

A)   immediately recognize $2,125,000 as additional pension expense in its income statement.

B)   record $375,000 as additional pension expense on its balance sheet.

C)   record $2,125,000 as additional pension liability on its balance sheet.

Q5. Which of the following statements regarding the treatment of pension plan amendments under U.S. GAAP standards is most

    accurate? A plan amendment results in:

A)   the disclosure in the pension plan footnotes of the nature of the amendment and the projected future financial impact.

B)   an immediate increase in pension expense equal to the amount of the amendment.

C)   an unrecognized prior service cost that is amortized over the expected remaining service life of the affected employees.

Q6. Pension expense as reported by a firm is routinely adjusted by analysts to derive a more accurate measure of a firm’s true

    economic pension cost. Adjusted pension expense is calculated as:

A)   reported pension expense – service cost + interest cost.

B)   reported pension cost – actual return on plan assets.

C)   service cost + interest cost – actual return on plan assets.

Q7. Under current U.S. GAAP, the assets and liabilities of a defined benefit pension plan are:

A)   reported in the appropriate section of the balance sheet, with pension obligations shown under liabilities and plan assets shown under assets.

B)   netted against each other, and only the net asset or liability amount is reported on the company’s balance sheet.

C)   off balance sheet items which are shown only in the footnotes.

答案和详解如下：

Q3. According to U.S. GAAP, companies must account for pension assets and the associated pension obligation in their financial

     statements. These could be reported in two ways. Method 1 is to report the values of the pension fund assets and liability

     separately on the balance sheet. Method 2 is to report a net amount for the difference between the value of the fund assets

     and the fund liabilities. Which of the following statements most accurately describes the requirements of U.S. GAAP?

A)   Companies are required to use Method 2.

B)   Companies may choose to use either method.

C)   Companies are required to use Method 1.

Correct answer is A)

GAAP requires that companies use the “net” method, which decreases a firm’s total assets and total liability. Netting also affects certain financial ratios, such as return on assets and leverage ratios.

Q4. Prime Doors has recorded a net pension liability of $1.5 million on its balance sheet. According to current U.S. accounting

    standards, Prime Doors is required to:

A)   immediately recognize $2,125,000 as additional pension expense in its income statement.

B)   record $375,000 as additional pension expense on its balance sheet.

C)   record $2,125,000 as additional pension liability on its balance sheet.

Correct answer is C)

According to current U.S. accounting standards, the funded status must be reported on the balance sheet. The plan is underfunded by $3,625,000 ($11,875,000 Plan assets − $15,500,000 PBO). Since Prime Doors is reporting a liability of $1,500,000, an additional liability of $2,125,000 ($3,625,000 required liability − $1,500,000 reported liability) must be reported.

Q5. Which of the following statements regarding the treatment of pension plan amendments under U.S. GAAP standards is most

    accurate? A plan amendment results in:

A)   the disclosure in the pension plan footnotes of the nature of the amendment and the projected future financial impact.

B)   an immediate increase in pension expense equal to the amount of the amendment.

C)   an unrecognized prior service cost that is amortized over the expected remaining service life of the affected employees.

Correct answer is C)

The amendment affects the funded status on the balance sheet immediately. In the income statement, the amendment is amortized as a component of pension expense over the remaining service life of the affected employees.

Q6. Pension expense as reported by a firm is routinely adjusted by analysts to derive a more accurate measure of a firm’s true

    economic pension cost. Adjusted pension expense is calculated as:

A)   reported pension expense – service cost + interest cost.

B)   reported pension cost – actual return on plan assets.

C)   service cost + interest cost – actual return on plan assets.

Correct answer is C)

Adjusted pension expense is calculated without reflecting the amortized items normally included in pension expense and using “actual” instead of “expected” return on assets.

Q7. Under current U.S. GAAP, the assets and liabilities of a defined benefit pension plan are:

A)   reported in the appropriate section of the balance sheet, with pension obligations shown under liabilities and plan assets shown under assets.

B)   netted against each other, and only the net asset or liability amount is reported on the company’s balance sheet.

C)   off balance sheet items which are shown only in the footnotes.

Correct answer is B)         

Under current U.S. GAAP, companies are required to report only the net asset or liability amount. They cannot show assets and liabilities separately. Although some smoothing details are still disclosed in the footnotes, all major components of pension assets and liabilities are now required to be shown on the balance sheet.

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