Final answer:
The statement is a) true; the interest component of pension expense is calculated by multiplying the settlement rate by the beginning balance of the projected benefit obligation, acknowledging the time value of money.
Step-by-step explanation:
The statement that the interest component of pension expense in the current period is computed by multiplying the settlement rate by the beginning balance of the projected benefit obligation is a) true.
This is a standard method used in accounting for pensions.
The projected benefit obligation (PBO) reflects the present value of the expected future payments to employees based on their service to date, with assumptions about future employment and compensation levels.
The settlement rate, which is also referred to as the discount rate, is used to calculate the interest component of pension expense.
This interest cost recognizes the time value of money, as the obligations are expected to be settled in the future, and the PBO amount will increase over the period until it is paid out.
Therefore, the interest cost is the product of the beginning balance of the PBO and the settlement rate for the period.