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When someone say the gains or losses is an element of ...

When someone say the gains or losses is an element of pension expense, can this mean the company would have to take action if the pension is over or under funded? If the pension is under funded the company needs to increase funding and thus expense is increased. But, if the pension was under funded, what action is the company required to take?

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When the pension plan is underfunded, the liabilities of the pension plan outweigh the current plan assets. In an underfunded plan, the plan is basically starting to cost the company more money than they had intended, and this happens because management falls short on the annual payments that are needed to fund the plan's assets (they couldn't make the payments, there wasn't enough working capital to do so). If the plan is underfunded, management needs to find a way to again increase their payments to the plan. Underfunded plans are common during a recession because the money isn't there, and any money that management does have goes to supporting day to day ...

Solution Summary

When someone say the gains or losses is an element of pension expense, can this mean the company would have to take action if the pension is over or under funded? If the pension is under funded the company needs to increase funding and thus expense is increased. But, if the pension was under funded, what action is the company required to take?

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