Question

Which of the following is true regarding pension (and other employee benefit) trust funds?

A. The actuarially computed Net Pension Liability is reported in the Statement of Fiduciary Net Position.
B. While the accrual basis of accounting is used, the terms "additions" and "deductions" are used in the Statement of Changes in Fiduciary Net Position in lieu of "revenues" and "expenses"
C. Both of the above
D. Neither of the above

Answer 1

The true statement regarding pension (and other employee benefit) trust funds is that the terms 'additions' and 'deductions' are used instead of 'revenues' and 'expenses' in the Statement of Changes in Fiduciary Net Position.

Step-by-step explanation:

In regards to pension (and other employee benefit) trust funds, the correct statement is B. While the accrual basis of accounting is used in pension trust funds, the terminology favored is "additions" and "deductions" in the Statement of Changes in Fiduciary Net Position, rather than "revenues" and "expenses". This reflects the unique nature of trust fund accounting, where the focus is on changes in net assets available for benefits, rather than on profit generation. The Net Pension Liability, which is the actuarially computed shortfall or surplus of pension fund assets relative to the anticipated pension obligations, is generally reported in the notes to the financial statements or required supplementary information, rather than in the Statement of Fiduciary Net Position itself.