Prior Service Cost
Prior Service Cost (PSC)
- Arises from amendments to the plan that grant increased benefits to employees based on services already rendered.
- Should it be recognized entirely during the current period by charging the current pension expense for the entire amount?
- Answer: NO
- PSC should be deferred and periodically amortized to pension expense.
- Increases the PBO, creates account Unamortized PSC.
- Should be amortized over the average future period of service of employees active at the time of the amendment who are expected to receive plan benefits.