Question

Which of the following is not one of the four alternatives an accounting regulator would consider when examining how to initially account for prior service cost?

a) Accelerated depreciation for tax purposes
b) Straight-line depreciation for financial reporting
c) Unrealized gains on available-for-sale securities
d) Tax-exempt interest income
e) Amortization of goodwill for tax purposes

Answer 1

Unrealized gains on available-for-sale securities is the option that would not be considered by an accounting regulator when examining how to account for prior service cost, as it is related to investment accounting rather than pension cost accounting.

Step-by-step explanation:

The question pertains to how to initially account for prior service cost in accounting, which refers to the costs associated with retroactive benefits granted when a pension plan is amended. The alternatives an accounting regulator would consider for this typically involve options related to pension cost accounting. Among the options provided, 'c) Unrealized gains on available-for-sale securities' is not one of the alternatives that would be considered when examining how to account for prior service cost. This is because unrealized gains on available-for-sale securities are related to the accounting for investments and changes in their fair value, which does not directly concern the accounting for pension costs.