The interest cost included in the annual pension cost recorded by an employer sponsoring a defined benefit pension plan represents the

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The interest cost included in the annual pension cost represents the increase in the defined benefit obligation due to the passage of time. This is because the longer employees work and accumulate service, the more the employer's obligation grows over time. This increasing obligation represents a liability on the employer's balance sheet, and the interest cost is the cost of carrying that liability throughout the year.

The Interest Cost Included in the Annual Pension Cost Recorded