Jack Kelly Company has grown rapidly since its founding in 2002. To instill loyalty in its employees, Kelly is contemplating establishment of a defined-benefit plan. Kelly knows that lenders and potential investors will pay close attention to the impact of the pension plan on the company’s financial statements, particularly any gains or losses that develop in the plan. Kelly has asked you to conduct some research on the accounting for gains and losses in a defined-benefit plan.

Instructions Using the Financial Accounting Research System (FARS), respond to the following items. (Provide text strings used in your search.)

(a) Briefly describe how pension gains and losses are accounted for.

(b) Explain the rationale behind the accounting method described in part (a).

(c) Kelly wants to better understand the factors that led to accounting standards for pensions. What environmental factors led to increased regulations over pension cost reporting?