At the end of 20x1, Cobble’s actuary changed the discount rate applied to the projected benefit obligation from 8% to 7%. How does a decrease in the discount rate affect pension calculations? Why? Which numbers on your pension worksheet would be influenced by this change? Explain your answer.

At the end of 20x1, Cobble’s actuary changed the discount rate applied to the projected benefit obligation from 8% to 7%. How does a decrease in the discount rate affect pension calculations? Why? Which numbers on your pension worksheet would be influenced by this change? Explain your answer.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Employee Benefits

In an organization employees are the most important resource and most important asset. They can lead an organization to the sky or can be the reason for unsuccessful of business. Therefore, it is very much important that employees of an organization should be satisfied by the environment of the organization and most importantly with the salary, wages incentives, etc.

Question

At the end of 20x1, Cobble’s actuary changed the discount rate applied to the projected benefit obligation from 8% to 7%.
1. How does a decrease in the discount rate affect pension calculations? Why?
2. Which numbers on your pension worksheet would be influenced by this change? Explain your answer.

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