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Please explain to me how to treat the interest cost related to past service cost in defined benefit plan.
Do we also need to adjust the contribution in calculating the liability?
Don’t adjust the contribution – that is the cash which you never adjust.
Normally NIC is opening interest rate x opening liability.
Exception – if the past service cost takes effect from the START of the year:
Then NIC is opening interest rate x (opening liability + increase in liability due to past service cost)