Income Smoothing
Response to the following problem:
Generally, accounting principles do not support the concept of income smoothing (the avoidance of year-to-year fluctuations in the amount of income). A friend of yours, however, after studying GAAP, claims, "Pension accounting includes income smoothing."
Required:
Describe the methods by which GAAP avoids year-to-year fluctuations in the amount of pension expense.