Final answer:
In the context of pension accounting, companies should recognize the entire increase in projected benefit obligation (PBO) due to a plan initiation or amendment as pension expense in the year of amendment.
Step-by-step explanation:
In the context of pension accounting, companies should recognize the entire increase in projected benefit obligation (PBO) due to a plan initiation or amendment as pension expense in the year of amendment. This is because a plan initiation or amendment can significantly impact the company's future pension obligations, and recognizing the increase as pension expense allows for a more accurate reflection of the costs involved.
For example, if a company introduces a new pension plan or makes changes to an existing plan that increase the projected benefits payable to employees, recognizing the entire increase in PBO as pension expense in the year of amendment helps to provide transparency and accountability for the costs associated with the plan.
By recognizing the increase in PBO as pension expense in the year of amendment, companies ensure that the financial statements reflect the current obligations and costs related to the pension plan, enabling employees and stakeholders to make more informed decisions and assessments.