Seeing is believing!
Before you order, simply sign up for a free user account and in seconds you'll be experiencing the best in CFA exam preparation.
Basic Question 15 of 17
Select the correct statement(s):
II. It is possible that a company's pension plan can be underfunded on the basis of funded status, but overfunded according to the reported funding level.
I. Underfunding of the reported funding level is not a concern for investors because what matters is the funding status of the real economic position of a pension plan.
II. It is possible that a company's pension plan can be underfunded on the basis of funded status, but overfunded according to the reported funding level.
User Contributed Comments 4
| User | Comment |
|---|---|
| josepe | Funded status = fair value of plan assets less PBO. If PBO is larger than fair value of plan assets, funded status is underfunded. Reported funding level depends on expected return on plan assets. If expected return is higher than actual return, as well in this case as higher than required return to be fully funded, reported funding level will be overfunded. |
| josepe | I should have mentioned that fair value of plan assets depends only on actual return, not expected return. |
| DCPWS | Josepe - very helpful. |
| lvjunzhang | why not I |
I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
explain and calculate how adjusting for items of pension and other post-employment benefits that are reported in the notes to the financial statements affects financial statements and ratios;
interpret pension plan note disclosures including cash flow related information;
CFA® 2025 Level II Curriculum, Volume 2, Module 11.