Final answer:
It is false that companies must recognize the entire increase in projected benefit obligation due to a plan initiation or amendment as pension expense in the year of amendment.
Instead, such costs are often amortized over the service lives of the employees.
Step-by-step explanation:
The question addresses the accounting treatment of pension expenses in the context of a plan initiation or amendment.
In this scenario, it is false that companies should recognize the entire increase in projected benefit obligation as pension expense in the year of amendment.
According to accounting standards, such as those set by the Financial Accounting Standards Board (FASB), the cost of a plan amendment giving rise to an increase in the projected benefit obligation may need to be amortized over the service lives of the employees.
This approach aims to reflect the expense over the period that the amended benefits will be earned by the employees, instead of recognizing it all in the year of the amendment.
It penalizes firms for underfunding their pension plans and gives employees more information about their pension accounts.