Question

Which of the following statements are correct with regard to defined benefit plans and comprehensive income?

a) Defined benefit plans have no impact on comprehensive income.
b) Gains and losses on pension plans are reported in comprehensive income.
c) Defined benefit plans only affect net income.
d) Comprehensive income excludes pension adjustments.

Answer 1

Gains and losses on pension plans are reported in comprehensive income.

Step-by-step explanation:

Of the given options, statement (b) is correct with regard to defined benefit plans and comprehensive income. Gains and losses on pension plans are reported in comprehensive income.

Defined benefit plans are retirement plans in which an employer promises to pay a pension benefit to employees after retirement, typically based on a formula that considers factors such as years of service and salary. These plans are recorded in the company's financial statements, including comprehensive income, as gains or losses can impact the overall financial performance.

On the other hand, statements (a), (c), and (d) are incorrect. Defined benefit plans can affect both net income and comprehensive income, as gains and losses on these plans are reported in comprehensive income. Comprehensive income includes pension adjustments.