According to current GAAP, termination benefits paid to an employee should be

A) charged to an intangible asset and amortized straight-line over the next 15 years
B) charged to a loss
C) charged to retained earnings
D) charged to an intangible asset and amortized over the projected years of service of the remaining work force

Question

Alvin Abraham · Accepted Answer

Final Answer : B, Explanation :  According to current GAAP, termination benefits paid to an employee should be charged to a loss. This is because termination benefits are considered a cost of exiting an activity and should be recognized in the period in which the obligations for termination benefits are incurred. The amount recognized should be based on the fair value of the benefits expected to be paid, considering factors such as the employee's years of service, age, and any other relevant factors. These costs should be recognized in the financial statements as an expense and included in the income statement.

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