Pension Service Cost
Service Cost: The actuarial present value of benefits attributed by the formula to employee services rendered during the period.
- Actuarial assumptions reflect the discount rate and other assumptions reflecting the probability of payment (mortality, attrition, age & sex of work force).
- Actuarial calculations are very complex! Accountants rely on the work of a specialist.
- Theoretically this is the increase in future benefits to employees as a result of the current period service.
- Service component is added to the projected benefit obligation.