Prior service cost is the increase in the projected benefit obligation created by pension plan amendments.

Question

Quizplus · Accepted Answer

Prior service cost arises when a company introduces changes to the pension plan that affect the benefits earned by employees for their past service. The adjustments can be either positive or negative, but either way, they will increase the projected benefit obligation (PBO) for the plan. Therefore, the statement is true.

Prior Service Cost Is the Increase in the Projected Benefit