Service Cost (Pension)

Definition: Service Cost is the actuarial present value of pension benefits earned by employees during the current period under a defined benefit pension plan.…

Service Cost is the actuarial present value of pension benefits earned by employees during the current period under a defined benefit pension plan. It is the largest component of net periodic pension cost and is recognized as compensation expense (operating expense) on the income statement under ASC 715 and IAS 19. Service cost increases the Projected Benefit Obligation (PBO) each period as employees provide additional service to the company.