The following reason out the use of projected salaries as the base of computing the projected benefit obligation, except failure to incorporate salary projections, when most funding is based on salary projections, may result in the reporting of an apparent overfunding when the plan is not overfunded, or in reporting adequate funding when the plan is underfunded increases in benefits attributable to a salary increase become an obligation of the plan at the time of the salary increase under final pay plans, benefits are determined by reference to salaries at or near retirement date; hence salaries, contribution levels and rates of return must be projected financial information should be prepared on a going concern basis, irrespective of the assumptions and estimates that must be mad
The following reason out the use of projected salaries as the base of computing the projected benefit obligation, except failure to incorporate salary projections, when most funding is based on salary projections, may result in the reporting of an apparent overfunding when the plan is not overfunded, or in reporting adequate funding when the plan is underfunded increases in benefits attributable to a salary increase become an obligation of the plan at the time of the salary increase under final pay plans, benefits are determined by reference to salaries at or near retirement date; hence salaries, contribution levels and rates of return must be projected financial information should be prepared on a going concern basis, irrespective of the assumptions and estimates that must be mad
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The following reason out the use of projected salaries as the base of computing the projected benefit obligation, except
- failure to incorporate salary projections, when most funding is based on salary projections, may result in the reporting of an apparent overfunding when the plan is not overfunded, or in reporting adequate funding when the plan is underfunded
- increases in benefits attributable to a salary increase become an obligation of the plan at the time of the salary increase
- under final pay plans, benefits are determined by reference to salaries at or near retirement date; hence salaries, contribution levels and
rates of return must be projected
- financial information should be prepared on a going concern basis, irrespective of the assumptions and estimates that must be made
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