A past service cost arises when:

Question

Quizplus · Accepted Answer

A past service cost arises when a defined benefits post-employment plan is established or when the plan's benefits are increased. This is because these plans provide benefits based on an employee's past service and salary history, so any change to the plan's benefit structure will affect the calculation of past service costs. Terminating an employee or hiring a new employee does not directly impact past service costs. A defined contributions plan is not based on past service, but rather contributions made to the plan, so any increase in benefits would not result in a past service cost.

A Past Service Cost Arises When