Distinguish and measure benefit obligations

The actuarial report lists VBO of $8.6 million, ABO of $9.4 million, and PBO of $11.2 million. Copying the largest number into every table would be conservative but wrong. Each measure has a distinct compensation and service boundary.

Read each obligation label literally

For a final-pay pension formula, PBO often exceeds ABO because future salary growth affects benefits already attributed to service. VBO can be below ABO because some accumulated benefits remain contingent on future service. That ordering is not a valuation rule. Plan formulas, amendments, lump-sum options, participant status, caps, floors, and other terms can alter the relationship. Use the actuary's supported amounts for the exact plan and date.

VBO is the actuarial present value of vested benefits, not a second projected- salary measure. For a final-pay formula, identify the compensation already embedded in the actuary's vested-benefit measure and the plan terms supporting it; do not silently import PBO's future-compensation projection into the VBO column.

Tie the population before the dollars

The population bridge should reconcile:

opening active + deferred vested + retirees and beneficiaries
  + entrants and acquisitions
  - deaths, terminations, lump sums, and transfers
  = ending population by status

A dollar rollforward can balance while participants are duplicated or omitted. Reconcile the census to payroll, human-resources records, benefit-payment registers, and acquisition or divestiture files. Differences go back to the data owner and actuary; accounting does not “true up” an actuarial population with a journal entry.

Preserve the measurement clock

Label the actuarial report's:

• plan and population;
• measurement date and reporting date;
• benefit formula and amendments reflected;
• discount, compensation-growth, mortality, retirement, turnover, and election assumptions;
• method and attribution convention;
• events reflected after the measurement date; and
• whether the actuary provides PBO, ABO, VBO, EPBO, APBO, service cost, interest cost, and gain/loss components.

ASU 2015-04's closest-month-end expedient is a consistent accounting-policy election for qualifying entities, not permission to use whichever report is available. Contributions and significant entity-caused events between the elected measurement date and year-end require the prescribed adjustment or remeasurement and disclosure.

Do not turn a reconciliation into a valuation

The curriculum engine can prove that a supplied opening obligation plus named movements equals a supplied ending obligation. It cannot calculate a participant benefit, select a yield curve, project salary, choose mortality, estimate healthcare utilization, or conclude on an optional form of payment.

Suppose the signed report says:

The accounting file may compare these measures and use PBO in funded status. It may not derive the $11.2 million by applying a textbook annuity factor to the $9.4 million ABO. The salary-growth, retirement, mortality, discount, and participant-level interactions belong to the actuary.

Carry one obligation into each later rail

The obligation register should say exactly where the measure goes:

• PBO flows to the pension obligation rollforward and pension funded status;
• ABO may support required disclosure and analysis but does not replace PBO;
• VBO explains vesting exposure but does not set the balance-sheet liability;
• APBO flows to the other postretirement rollforward and funded status; and
• EPBO supports attribution but is not an extra liability beside APBO.

The file is ready for movement analysis only when one supported measure, one population, and one date are attached to every downstream schedule.