Question #22
Reading: Reading 9 Employee Compensation - Post-Employment and Share-Based
PDF File: Reading 9 Employee Compensation - Post-Employment and Share-Based.pdf
Page: 8
Status: Correct
Correct Answer: B
Question
Wes Livingston is the founder and CEO of Bigwell Corporation. Livingston is interested in Bigwell being acquired by a larger competitor and wants to have his company's financial statements appear as attractive as possible to a potential suitor. In order to decrease the projected benefit obligation (PBO) of the company's pension plan, which of the following changes in actuarial assumptions could be made?
Answer Choices:
A. Decrease the discount rate
B. Increase the rate of compensation growth
C. Increase the discount rate
Explanation
Increasing the assumed discount rate of a pension plan will result in lower projected
benefit obligation (PBO). Increasing rate of compensation growth and decreasing discount
rate would increase the PBO.