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The net periodic pension cost for a defined benefit pension plan is computed on the basis of the present value of the pension obligation as of a particular date, including all benefits that the pension benefit formula attributes to employee services rendered up to that date. Accordingly, the net periodic pension cost of a defined benefit pension plan consists of these components (FAS ASC 715-30-35-4):

The six components constitute the net pension cost for the periods. The service cost component is presented separately from the others. Service cost is included in the financial statement line item(s) where other components of employee compensation are reported, including those costs that are capitalized (e.g., compensation related to manufacturing labor involved in the manufacturing of an entity’s inventory). Conversely, the other components of net pension cost are reported in the statement of income below operating income but within income from operations

Note that the return on plan assets is a factor affecting net periodic pension cost. When a gain is amortized, the gain/loss component represent a cost reduction. When a loss is amortized, the gain/loss component represents an addition in determining net periodic pension costs.

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