The interest rate that is assumed to be earned on pension funds can have a material influence on the pension expense and the pension liability.The higher the rate of interest assumed to be earned on pension funds,the higher the pension expense and the higher the pension liability.

Question

Quizplus · Accepted Answer

A higher assumed rate of interest on pension funds typically leads to a lower pension expense and a lower pension liability because the expected return on plan assets reduces the amount the company needs to contribute in the present.

The Interest Rate That Is Assumed to Be Earned on Pension