Asked by Miranda Wilkerson on May 03, 2024

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The payments made by the employer to fund a defined contribution pension plan create a pension fund asset on the balance sheet of the employer.

Pension Fund Asset

Financial resources that a pension fund holds to meet future obligations to participants, including equities, bonds, real estate, and other investments.

Defined Contribution Pension Plan

A retirement plan where employers, employees, or both make contributions on a regular basis, but the benefits received depend on the plan's investment performance.

Balance Sheet

A financial statement that provides a snapshot of a company's financial position, including assets, liabilities, and shareholders' equity at a specific point in time.

  • Differentiate the characteristics of defined benefit pension plans from those of defined contribution schemes.
  • Comprehend how pension funding affects an employer's balance sheet and pension expense.
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Sashauna PatrickMay 06, 2024
Final Answer :
False
Explanation :
Payments made by the employer to fund a defined contribution pension plan are recorded as expenses in the employer's income statement and do not create a pension fund asset on the employer's balance sheet. The pension fund assets are held in a separate legal entity for the benefit of the employees.