Pension Benefit Obligation - PBO
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Definition of 'Pension Benefit Obligation - PBO'
An accounting term used to describe the amount of money a company must pay into a defined-benefit pension plan to satisfy all pension entitlements that have been earned by employees up to that date. The pension benefit obligation (PBO) is calculated by an actuary, who determines the benefits needed through a present value calculation.
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Investopedia explains 'Pension Benefit Obligation - PBO'
A pension benefit obligation is a calculation of the total amount due to employees in the pension fund for all of the past service completed up to that date. Some of the assumptions an actuary will use to calculate the PBO include, but are not limited to, the estimated remaining service life of employees, salary raises and the mortality rates of employees.
Although a PBO is classified as a liability on the balance sheet, there is considerable criticism about whether it meets the predefined criteria of a liability, which are:
a) There is a responsibility to surrender an asset from the result of the transaction(s) taking place at a specified future date.
b) The company must surrender assets for the liability at some future point in time.
c) The transaction resulting in the liability has already taken place.
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Search results for 'Pension Benefit Obligation (PBO)'
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http://www.investopedia.com/articles/retirement/11/defined-benefit-pension-plans-primer.asp
... Under US GAAP, there are three different measures of a pension obligation: 1. Projected
Benefit Obligation (PBO) The present value of the future retirement ...
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http://www.investopedia.com/articles/retirement/10/demise-defined-benefit-plan.asp
... Plan.). Inaccurate Estimates The primary issue associated with offering a DB plan
begins with the estimation of the employee's pension benefit obligation (PBO). ...
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http://www.investopedia.com/articles/retirement/07/how_pensions_work.asp
... For example, the Pension Benefit Obligation (PBO) - the present-valued dollar value
a company estimates it will need to fund its pension plan - doesn't have to ...
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http://www.investopedia.com/university/financialstatements/financialstatements9.asp
... the retiree receives. Funded Status = Plan Assets - Projected Benefit
Obligation (PBO) A pension plan has two primary elements: ...
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http://www.investopedia.com/university/financialstatements/financialstatements10.asp
... The funded status of a pension plan, which equals the fair value of plan assets
minus the projected benefit obligation (PBO), tends to impact future earnings. ...
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