At the end of 2005, the present value of this $477,000 cost is $209,000, representing the current EPBO. Of the $209,000 EPBO, the company accrued an obligation of $105,000 during the years 1991 through 2005.
The APBO is the amount of the EPBO that has been accrued to date.
For retirees and active employees fully eligible for benefits, the APBO would be equal to the EPBO. Any differences between the APBO and EPBO would represent the future service costs of active employees not yet fully eligible.(5)
The estimated service cost related to postretirement benefits refers to the portion of the EPBO that is related to employee service for the period.
Assumed discount rates are used to determine the EPBO, the APBO and the service and interest cost components of net cost.
* Service cost: the portion of the EPBO that is attributable to employee service for the period.
Service cost under FAS 106 is the expected post retirement benefit obligation (EPBO
) attributed to employee service during a period.
The EPBO is measured by determining the estimated future claims in each retirement year and computing the present value of those claims in the year of the financial statements.
Service costs for both pensions and OPERBs are the portion of the PBO or EPBO attributed to employee service for that period.
is the actuarial present value as of a particular date of the benefits expected to be paid on behalf of an employee reduced by the present value of contributions expected to be received from the employee.
is allocated between past service and future service.
Interest cost reflects the imputed growth during the period in the portion of the EPBO
that has been "earned" by employee services provided as of a particular date - referred to as the accumulated postretirement benefit obligation (APBO) - using the assumed discount rate.