What is Projected benefit obligation (PBO)?
In short
The projected benefit obligation (PBO) is the actuarial present value of pension benefits earned by employees to date, measured using expected future salary levels.
Key takeaways
- It increases with service cost, interest cost and actuarial losses, and decreases with benefits paid.
- The accumulated benefit obligation uses current salaries instead of future ones.
- The funded status, plan assets minus the obligation, is reported on the balance sheet.
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
A defined benefit plan has plan assets with a fair value of $8,000,000 and a projected benefit obligation of $9,500,000. How is this reported on the balance sheet?