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May I ask How to understand why pension scheme need to be splitted into asset and liability? Why service cost is only included in liability?
Hi,
We have an asset for the investments that have been made, the liability reflects the obligation the company has to make the payment to the employees on retirement.
The service cost reflects the work done by the employee in the year and thus the pension earned in the year. We have to reflect the extra money pension earned by increasing the liability.
Thanks
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