Accounting for Post-Employment Benefits

Easy Employee Compensation Post-employment Benefits

Company XYZ offers its employees a defined benefit pension plan. Under this plan, employees receive a guaranteed retirement income based on their salary and years of service. As part of the company's financial reporting, it must account for this post-employment benefit accurately in its financial statements. Which of the following statements correctly reflects the accounting treatment for post-employment benefits?

The cost of the pension benefit is recognized as an expense in the income statement in the period that the employees render service.

The total pension obligation is immediately recognized as a liability in the balance sheet regardless of employee service time.

Changes in the pension plan assets are only recognized in the income statement when the assets are sold.

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