Pension capitalization boundary has one role in the employer's benefit accounting. Only the service-cost component is eligible for capitalization as part of inventory or another asset. The guidance for that asset still decides whether and how much service cost qualifies.
Apply it
If pension service cost is $1.2 million and $200,000 relates to employees building a qualifying asset, the asset guidance may support that $200,000. Interest, expected return, and amortization remain outside.
Common mistake
Do not assume that any pension cost component may be capitalized into inventory. Only the service-cost component is eligible for capitalization when another Topic requires employee compensation to be capitalized. That error would defer nonservice pension components in an asset when current guidance does not permit it.
Keep the boundary clear
Eligibility is not automatic capitalization. Employee assignments, cost allocation, and the receiving asset's recognition rules require separate support.
Authority
Read ASC 715-20-45-3A for the service-cost capitalization boundary.
Put the concept to work
Apply this concept
- Explain and apply pension capitalization boundary within a reconciled employer benefit-plan workpaper using supplied authoritative and actuarial facts.
Learning resources
Choose a lesson, try an application, or inspect the sources behind this concept.
Build on these ideas
- Pension service cost — Apply
To apply this concept: Required. This prior schedule supplies a required amount or classification.