Question

Are amortized amounts only used to calculate pension expense or is it used to calculate other amounts?

Answer 1

Solution- No,amortized amounts are not only used to calculate pension expense but also other various amounts are calculated ,Let's understand the meaning of amortization,Amortization is an accounting technique used to periodically lower the book value of a loan or intangible asset over a set period of time.In relation to a loan, amortization focuses on spreading out loan payments over time. When applied to an asset, amortization is similar to depreciation.So constantly lowering of value of loan or asset is called amortization.
1)Amortization of Loans-Firstly, amortization is used in the process of paying off debt through regular principal and interest payments over time. An amortization schedule is used to reduce the current balance on a loan, for example, a mortgage or car loan, through installment payments.
2)Amortization of Intangible asset-Secondly, amortization of an asset should only start when the asset is brought into actual use, and not before, even if the required intangible asset has been acquired.Intangible assets include goodwill,copyrights etc.
The level amortization should be appropriate so that the value of an asset is not under or overstated.
When amortization is referred to pension plan it means,there are two primary needs for amortization within the context of pension plan. firstly it might include a company determining whether to apply current or new pension benefits with effect to employees who performed services before the current iteration of the pension plan was implemented. secondly, amortization applies to deferring current gains or losses in the pension account resulting from either an experience different from what had been assumed or from changes in actuarial assumptions.