Interest Cost (Pension)

Definition: Interest Cost is the increase in the Projected Benefit Obligation (PBO) due to the passage of time, calculated as the beginning PBO multiplied by t…

Interest Cost is the increase in the Projected Benefit Obligation (PBO) due to the passage of time, calculated as the beginning PBO multiplied by the discount rate. Conceptually it represents the unwinding of the discount on the present-valued pension liability. Under ASC 715 (post-2017 amendment) interest cost is reported below operating income in the 'other income/expense' section of the income statement, separated from service cost which remains in operating expenses.