Defined Benefit Plan Accounting

Easy Employee Compensation Defined Benefit Plans

ABC Corporation operates a defined benefit pension plan for its employees. The plan promises to pay retirement benefits based on the employees' years of service and their salary at the time of retirement.

In analyzing ABC’s financial statements, an analyst notes that the company recognizes the net periodic pension cost as an expense in the income statement and calculates this cost using several actuarial assumptions.

Which of the following statements regarding defined benefit plans and their accounting treatment is true?

Defined benefit plans entail fixed contributions to a fund managed by the employee.

The funded status of a defined benefit plan reflects the difference between the fair value of plan assets and the future benefit obligations.

Under IAS 19, defined benefit costs are all recognized as current expenses in the period incurred.

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