The interest cost component of a defined benefit pension plan is the portion of expense due to the passage of time.

Question

Quizplus · Accepted Answer

The interest cost component of a defined benefit pension plan is indeed the portion of expense that reflects the passage of time. It is calculated by multiplying the plan's projected benefit obligation (PBO) with the assumed discount rate. This component of expense represents the increase in the PBO due to the accrual of interest on the projected benefits during the current period.

The Interest Cost Component of a Defined Benefit Pension Plan