Ask Joey ™ a Question

How to calculate the project benefit obligation?

Basically, you need to roll forward the obligation balance from the beginning of the year (i.e. which equals end of prior year), and then factor in the items listed in the rollforward below. That will get you to your ending PBO, and that is what is recorded on the balance sheet as the ending liability (can be split into current and non-current).

For example, if Gary had a beginning PBO of $230,000, service costs of $15,000, benefits paid of $19,000, interest costs of $12,000 and actuarial losses of $5,000, then the ending PBO would be $243,000.


You might also be interested in...

  • What items increase the pension benefit obligation and what items decrease the pension benefit obligation?

    There are five main items that either increase the PBO (increase the liability) or decrease the PBO (decrease the liability. The items that will increase the PBO include interest cost, service cost, and actuarial losses. The items that decrease the PBO (reduce the liability) include actuarial gains and benefits paid to retirees.