Pension prior service cost or credit has one role in the employer's benefit accounting. Prior service cost or credit is the PBO change from an amendment affecting service rendered before the amendment. Recognize the obligation change and current OCI before applying the supported later amortization.
Apply it
A July amendment adds $600,000 to PBO. Current OCI records $600,000 of prior service cost; $120,000 amortization leaves a $480,000 ending AOCI layer.
Common mistake
Do not assume that a plan amendment's full effect belongs in current pension cost. The amendment effect is recognized through OCI and AOCI, then amortized under the applicable rules. That error would skip OCI and the later amortization of the amendment's effect.
Keep the boundary clear
A future-service change is not automatically prior service cost. The executed amendment, effective date, population, and actuarial remeasurement control classification.
Authority
Read ASC 715-30-35-11 for recognition of a retroactive plan amendment.
Put the concept to work
Apply this concept
- Explain and apply pension prior service cost or credit 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 plan amendment — Apply
To apply this concept: Required. This prior schedule supplies a required amount or classification.