What are the future benefits companies derive from costs


What are the future benefits companies derive from these costs?

Actual return on plan assets is the earned amount on the return by the accumulated pension fund assets in a particular year that is relevant in measuring the net cost that goes to the employer for contributing to the employees' pension plan. Amortization of unrecognized prior service cost happens because company's grant plan amendments with the expectation that they will receive economic benefits in future periods by allocating the cost of the benefits to the pension expense in the future. The component gain or loss happens because the market is constantly changing and because of the changes a company may either gain or loss depending on the amount of their actual return versus the expected return.

The interest rate is determined by calculating the interest for the period on the outstanding projected benefit obligation during the period. The reason prior service cost is amortized is because most company's don't provide credit for past years of service unless they are expecting benefits in the future.

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Finance Basics: What are the future benefits companies derive from costs
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