Question
Why is PBO more economically meaningful than just cash contributions when analyzing a defined benefit plan?
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Answer
It reflects the present value of promised benefits.
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Question
If the fair value of plan assets exceeds PBO, what does the sponsor report?
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Answer
A net pension asset.
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Question
How is net pension liability measured?
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Answer
PBO− fair value of plan assets.
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Question
Why does a pension plan create a net pension liability when PBO exceeds the fair value of plan assets?
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Answer
Promised obligations exceed funded assets.
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