CFA Curriculum: FSA Reading 24 Question #3

On page 144 of reading 24 question #3 reads… Related to the accounting for EDC’s pension plan, what type of account balance is recognized on EDC’s balance sheet at 30 April 2005? A. 51 Asset B. 51 Liability C. 151 Asset D. 151 Liability Information pertaining to the funded status on April 30th 2005 is provided below: - Funded Status: 151 - Unrecognized net (gain): (99) - Unrecognized prior service cost: 11 - Unrecognized transition asset: (12) ---------------------------------------------------- - Prepaid (accrued) benefit cost: 51 Correct Answer is A. Can someone please explain why an unrecognized gain is subtracted from the funded status? Schweser gives an example under the old standard on page 201 of book 2 that is helpful… but I am still having problems driving this home. Anyone want to share how they rationalize gains in this problem?

The gain is already accounted for (recognized) in the funded status. Since the gain is should not be recognized, we need to deduct that amount to cancel out (unrecognize) that gain. That being said, under FASB 158, unrecognized stuff no longer impact the balance sheet. As such, I believe that this question is unlikely to show up on the exam.