Chapter 20: Q15Q. (page 1161)

If pension expense recognized in a period exceeds the current amount funded by the employer, what kind of account arises, and how should it be reported in the financial statements? If the reverse occurs—that is, current funding by the employer exceeds the amount recognized as pension expense—what kind of account arises, and how should it be reported?

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Funding is a term used when an organization raises money from the financial market or the investors in the initial days of incorporation to begin its activities.

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If the pension expense recognized exceeds the current amount funded by the employer

The pension liability account will rise. Further, the increased amount will be reported under the head of current or non-current liability in the organizations’ balance sheet that will strictly depend upon the payment date.

If the amount of current funding by the employer exceeds the amount recognized as pension expense

In this case, the pension asset account will rise. The amount increased will be reputed under the organization's balance sheet below the head current or non-current assets. It will strictly depend upon the nature of the payment. Further, it is treated under the head of pension asset/liability while recording the transaction in the organization's journal book.

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If the pension expense recognized exceeds the current amount funded by the employer

If the amount of current funding by the employer exceeds the amount recognized as pension expense

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