CPA Exam Questions: Projected Benefit Obligation (PBO) and Pension Expense. Intermediate Accounting

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Pension expense is the amount that a business charges to expense in relation to its liabilities for pensions payable to employees. The amount of this expense varies, depending upon whether the underlying pension is a defined benefit plan or a defined contribution plan. The characteristics of these plan types are as follows:
Defined benefit plan. Under this plan, the employer provides a predetermined periodic payment to employees after they retire. The amount of this future payment depends upon a number of future events, such as estimates of employee lifespan, how long current employees will continue to work for the company, and the pay level of employees just prior to their retirement. In essence, the accounting for defined benefit plans revolves around the estimation of the future payments to be made, and recognizing the related expense in the periods in which employees are rendering the services that qualify them to receive payments in the future under the terms of the plan.
Defined contribution plan. Under this plan, the employer’s entire obligation is complete once it has made a contribution payment into the plan, as long as no associated costs are being deferred for recognition in later periods. Thus, the employer commits to pay a specific amount of funds into a plan, but does not commit to the amount of benefits subsequently distributed by that plan. The accounting for a defined contribution plan is to charge its contributions to expense as incurred.

[@cooperdodge3522]

Thank you!!

[@AccountingLectures]

Welcome. Take a look at my at intermediate accounting course:
farhatlectures.pathwright.com/library/?category=Intermediate+Accounting

[@tomchoe12]

I'm confused. I'm reviewing with Roger CPA for pension expense, but it NEVER mentioned about reducing pension expense with expected return. The review course is telling me that I need to reduce pension expense with ACTUAL return of plan asset not expected...

[@AccountingLectures]

YOu will be given one or another. If given both, I will go with expected. Check my Roger FAR Supplemental Course: farhatlectures.pathwright.com/library/becker-far-cpa-supplemental-course-copy-8ebaf45e/about/

[@tarunk517]

Do I still learn this after the July 2021 changes?

[@AccountingLectures]

No This topic. Please take at look at my FAR resources: farhatlectures.pathwright.com/library/?category=CPA+Exam+FAR