Final answer:
An intangible asset (deferred pension cost) is created when a company promises to pay its employees a pension in the future and records this obligation on its balance sheet.
Step-by-step explanation:
An intangible asset (deferred pension cost) is created when a company promises to pay its employees a pension in the future, and records this obligation on its balance sheet.
When an employer provides a pension plan for its employees, it is essentially deferring the cost of funding the pension until future periods. This deferred pension cost is considered an intangible asset because it represents a future benefit that has value but cannot be physically touched or seen.
For example, let's say a company promises to pay its employees a monthly pension of $1,000 after they retire. The company would record this obligation as a deferred pension cost on its balance sheet. This represents the future cost that the company will incur to fulfill its pension obligations.
In summary, an intangible asset (deferred pension cost) is created when a company commits to paying its employees a pension in the future and records this obligation on its balance sheet.