Service cost and interest cost cause reported pension expense to increase for defined benefit plans.

Question

Quizplus · Accepted Answer

Both service cost and interest cost are components of the calculation for determining the pension expense for a defined benefit plan. Service cost is the cost of providing additional benefits to employees for their current year of service, while interest cost is the increase in the pension obligation due to the passage of time. Both of these factors increase the overall reported pension expense.

Service Cost and Interest Cost Cause Reported Pension Expense to Increase