These two sums are multiplied by the projected benefit obligation at the beginning of the year and the expected discount rate to get the cost of interest on the estimated benefit obligation.
An actuarial evaluation of what a corporation would require today to satisfy future pension commitments is called a projected benefit obligation (PBO). The projected benefit obligation (PBO) is updated to reflect anticipated compensation in the upcoming years and is based on the assumption that the plan won't be terminated anytime soon.
The projected benefit obligation covers the anticipated future work that employees are expected to perform, whereas the accumulated benefit obligation represents the current value of a pension liability based on the cumulative labor to date.
The estimated total of a company's pension plan liabilities at any given time is known as the accumulated benefit obligation. ABO is calculated without taking into account potential future wage increases and is based on the premise that the pension plan will be canceled immediately.
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