Question

How does an “asset gain or loss” develop in pension accounting? How does a “liability gain or loss” develop in pension accounting?

Short answer

Pension accounting is a terminology where the attributes of the pension plan arerecorded according to their nature and date of occurrence. Each amount is magnified under the pension worksheet and is recorded in relevant financial statements.

Step-by-step solution

Asset gain or loss in pension accounting

In pension accounting, when the actual return on plan assets is more than the expected return, it is recorded as an asset gain. On the other hand, when the expected return on plan assets exceeds the actual return on plan assets, it is reported as asset loss.

Liability gain or loss in pension accounting

When an organization experiences an uncertain or unexpected decrease in the value of pension obligation, it is regarded as a liability gain. On the other hand, when the organization notices an increase in pension obligation, it is reported as liability loss.