PBO past service cost

Past service cost is a component of pension accounting that arises when there are changes to the pension plan that result in benefits being granted for prior service. The amortization of past service cost is typically recorded as an expense on the income statement over the years that the affected employees are expected to receive the increased benefits.

In the context of pension accounting, the past service cost amortization is recognized over the expected remaining service lives of the employees who were affected by the plan amendment. This is typically done on a systematic and rational basis. The amortization expense is reported on the income statement and is part of the overall pension cost that the employer records.

The specific accounting treatment may vary based on the accounting standards used (e.g., International Financial Reporting Standards – IFRS or Generally Accepted Accounting Principles – GAAP in the United States). In the context of GAAP in the U.S., past service cost is recognized over the average remaining service period of employees affected by the plan amendment, often referred to as the “straight-line” method.

It’s essential to consult the relevant accounting standards and guidelines to ensure accurate and compliant treatment of past service cost and its amortization in financial statements.