What is the appropriate accounting treatment for an overfunded defined benefit pension plan acquired by a company?

When a company acquires an overfunded defined benefit pension plan, the appropriate accounting treatment is to recognize an asset on the balance sheet. This is because an overfunded pension plan indicates that the company's plan assets exceed the present value of the pension obligations.

In accounting terms, this surplus represents an asset for the acquiring company, as it can potentially be used to reduce future pension contributions or be returned to the company under certain circumstances. Recognizing this surplus aligns with the principles of fair value measurement and the overall objective of providing a true and fair view of the acquiring company's financial position after the acquisition.

The other options do not accurately reflect the appropriate accounting treatment for an overfunded defined benefit pension plan. Recognizing a liability would not apply since the plan is overfunded; ignoring the plan would overlook a significant asset that impacts the company's financial condition; and reporting it as a separate equity item is not consistent with accounting standards, as it is categorized as an asset rather than influencing equity directly.