Rakesh - ABO can never be greater than PBO [Never!! in true world]. They can be made to equal if the post-retirements benefits are non-compensatory based. But ABO greater than PBO would be tooo academic. Anyway’s if this question is to be answered, I would go with the bigger difference of the 2 possible cases PBO - FMVPA —> Case-1 ABO - FMVPA —> Case-2 In this hypothetical scenario you say that ABO > PBO then MLA of ABO - FMVPA should be on the face of the BS. [to generalize … whichever gives the greater liability difference] Because the prime motto of these GAAP guys was to make sure that you don’t choke up due to lack of liquidity off not been able to pay the pension obligations as them become due. Hence in the old GAAP, your firm underfunding the plan assets was fine if it was less than PBO, but the moment it went lower than ABO value [That means you are really-super-under funded] then you need to atleast show an liability of MLA on the BS. Dunno about all what I have written, Super I is the best person otta here to confirm this…
It seems Schweser have had real trouble with the new pension standards. The book wasn’t entirely clear on many issues, and the q-bank doesn’t seem to have been properly updated. They seem to expect candidates to update the q-bank for them. Not what you expect from a $350 product!
too much confusion, b is the clear answer