doc__table__758

| 97 | Past service cost arises when an entity introduces a defined benefit plan or changes the benefits payable under an existing defined benefit plan. Such changes are in return for employee service over the period until the benefits concerned are vested. Therefore, past service cost is recognised over that period, regardless of the fact that the cost refers to employee service in previous periods. Past service cost is measured as the change in the liability resulting from the amendment (see paragraph 64). Example illustrating paragraph 97 An entity operates a pension plan that provides a pension of 2 % of final salary for each year of service. The benefits become vested after five years of service. On 1 January 20X5 the entity improves the pension to 2,5 % of final salary for each year of service starting from 1 January 20X1. At the date of the improvement, the present value of the additional benefits for service from 1 January 20X1 to 1 January 20X5 is as follows: Employees with more than five years' service at 1/1/X5 150 Employees with less than five years' service at 1/1/X5 (average period until vesting: three years) 120 270 The entity recognises 150 immediately because those benefits are already vested. The entity recognises 120 on a straight-line basis over three years from 1 January 20X5.

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Source: EUR-Lex (Cellar) · retrieved 2026-11-08 · Text as adopted (Official Journal); later amendments are not incorporated in this text.