The following pension footnote disclosure is provided by the Company:

Note 8: Pension The company has a defined benefit pension plan covering substantially all of its employees. Pension benefits are based on employee service years and the employees compensation during the last two years of employment. The company contributes annually the maximum amount permitted by the federal tax code. Plan contributions provide for benefits expected to be earned in the future as well as those earned to date. The following reconciles the plans funded status and amount recognized in the balance sheet at December 31, 2016 ($ in 000s). Actuarial Present Value Benefit Obligations: Accumulated benefit obligation (including vested benefits of $318) $(1,305) Projected benefit obligation (1,800) Plan assets at fair value 1,575 Project benefit obligation in excess of plan assets $ (225) The Companys comparative I/S reported net periodic pension expense of $108,000 in 2016 and $86,520 in 2015. Since employment has remained fairly constant in recent years, its management expressed concern over the increase in the pension expense.

(Required) Describe the differences and similarities between ABO and PBO.

Explain how the Projected benefit obligation in excess of plan asset is reported in the financial statement.

With a pressure from earnings target from the market and a possibility of reduced annual bonuses tied to reported earnings, management of the Company may try to sacrifice the quality of reported earnings for the next fiscal year. Identify & briefly explain the actuarial assumption factors that can reduce the reported periodic pension expense. (For example, an increase in discount rate would reduce pension expense, because of lower service cost)