What is Net periodic pension cost?
In short
Net periodic pension cost for a defined benefit plan is made up of service cost, interest cost, the expected return on plan assets (a reduction), amortization of prior service cost, and amortization of net gains or losses.
Key takeaways
- Only service cost is reported in operating income; the other components are presented outside it.
- Only service cost can be capitalized, for example into inventory.
- Net gains and losses are amortized only to the extent they exceed the corridor.
Where it's tested
BAR: Employee Benefit Plan Accounting — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Which component REDUCES net periodic pension cost?