Intermediate Accounting (16th Edition)

Published by Wiley
ISBN 10: 1118743202
ISBN 13: 978-1-11874-320-1

Chapter 20 - Accounting for Pensions and Postretirement Benefits - Review and Practice - Questions - Page 1161: 11

Answer

When calculating the interest component of a pension, the interest rate to be used should be the prevailing interest during the time considered for determining the expense. The rate used should be the actual rates that were to be used if the payout was due. However, other higher rates for similar investments can also be used.

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The ultimate goal is making the projection be as accurate or as realistic as possible.
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