Net periodic pension cost has one role in the employer's benefit accounting. Net periodic pension cost assembles service cost, interest cost, expected return, supported prior-service and gain-or-loss amortization, and applicable special-event components.
Apply it
Service of $1.2 million plus $900,000 interest, less $900,000 expected return, plus $120,000 prior-service and $80,000 loss amortization, equals $1.4 million cost.
Common mistake
Do not assume that net periodic pension cost is service cost only. Periodic cost includes service cost and the other applicable Topic 715 components, each with its own presentation rule. That error would omit valid cost components and misstate the amount recognized in current earnings and the comprehensive-income bridge.
Keep the boundary clear
Contributions, benefits paid, actual return, and new OCI changes are not substituted for these components. Each belongs in a different ledger.
This cost applies to a pension plan and connects to its pension obligation, plan assets, funded status, and pension attribution facts. The similarly named net periodic postretirement benefit cost applies to other postretirement promises, such as supported retiree health or life benefits. Shared component names do not permit a pension schedule to stand in for the other plan's population, obligation, assets, assumptions, or service period.
Authority
Read ASC 715-30-35-4 for the required components of net pension cost.
Put the concept to work
Apply this concept
- Explain and apply net periodic pension cost within a reconciled employer benefit-plan workpaper using supplied authoritative and actuarial facts.
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Build on these ideas
- Pension interest cost — Apply
To apply this concept: Required. This prior schedule supplies a required amount or classification.
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Related concepts
- Employer pension workpaper
- Net periodic postretirement benefit cost
- Pension amortization reclassification
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Use this idea next
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Required level here: apply. Required. This prior schedule supplies a required amount or classification.
- Pension service cost presentation — Apply
Required level here: apply. Required. This prior schedule supplies a required amount or classification.