Accumulated Benefit Obligation

DEFINITION of 'Accumulated Benefit Obligation'

An approximate measure of a company's pension plan liability. The accumulated benefit obligation (ABO) is estimated based on the assumption that the pension plan is to be terminated immediately; it does not consider any future salary increases. This differs from the projected benefit obligation, which assumes that the pension plan is ongoing, and thus accounts for future salary increases.

BREAKING DOWN 'Accumulated Benefit Obligation'

Looking over a company's pension accounting can be an important piece of analysis for investors. Pension accounting is an area in which a company can be aggressive in many ways, such as the discount rate used for future pension obligations.