The PBO is the actuarial present value (at an assumed discount rate) of all future pension benefits earned to date, based on expected future salary increases. It measures the value of the obligation, assuming the firm is a going concern and that the employees will continue to work for the firm until they retire. Pension cost is periodic and not total projected. Pension liability is the net amount of PBO and fair value of plan assets.
(Study Session 6, 20.b) |
