Accumulated Benefit Obligation

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Benefit Allowance

    Money that a company or government agency provides to an employee ...
  2. Pension Fund

    A fund established by an employer to facilitate and organize ...
  3. Pension Benefit Guaranty Corporation ...

    A non-profit corporation that functions under the jurisdiction ...
  4. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  5. Pension Protection Act Of 2006 ...

    An act of legislation that makes a large number of reforms to ...
  6. Pension Shortfall

    A situation in which a company offering employees a defined benefit ...
Related Articles
  1. Retirement

    Keeping Track Of Retirement Plan Assets

    Maintain records of your pension benefits or risk losing them.
  2. Retirement

    The Investing Risk Of Underfunded Pension Plans

    Determine the risk to a company's EPS and financial condition resulting from an underfunded pension plan.
  3. Retirement

    A Primer On Defined-Benefit Pension Plans

    Most of us will rely on a pension plan in the future, so it's best to know the details of the various plans before signing up.
  4. Budgeting

    The Demise Of The Defined-Benefit Plan

    Experts are making bleak predictions for your post-work years. Be prepared and plan for your future.
  5. Investing

    How To Evaluate Pension Risk By Analyzing Annual Costs

    Learn how to assess whether a company's pension plan is posing more risks than what the footnotes indicate.
  6. Options & Futures

    Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  7. Professionals

    New 401(k) Pension Rollover Rule: Pros and Cons

    Is the new rule allowing participants to roll their 401(k) balances into pensions a good idea?
  8. Investing

    What's a Debit Note?

    A debit note is a document used by a seller to inform a purchaser of a dollar amount owed. As the name indicates, it is a note from the seller that a debit has been made to the purchaser’s account. ...
  9. Investing

    What's Capitalization?

    Capitalization has different meanings depending on the context.
  10. Fundamental Analysis

    The Best 5 Online Accounting Systems For Small Business

    Running a small business can be difficult, but thanks to these online accounting services, taking care of payroll doesn't have to be.

You May Also Like

Hot Definitions
  1. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  2. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  3. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  4. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  5. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center