Defining Issues | March 2017

FASB separates service cost from other pension cost components

KPMG reports on FASB ASU 2017-07, which amends ASC 715. The FASB ASU requires a company to present service cost separately from the other components of net benefit cost.


ASU 2017-07

  • A company that sponsors employee defined benefit pension or other postretirement benefit plans.

Relevant dates

Effective date:

Annual periods – Fiscal years beginning after

Interim periods – In fiscal years beginning after

Public business entities

Dec. 15, 2017

Dec. 15, 2017

All other entities

Dec. 15, 2018

Dec.15, 2019

Early adoption allowed?

Yes, at the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance.

Key impacts

  • Amends ASC 715
  • Requires companies to present the service cost component of net benefit cost in the income statement line items where they report compensation cost
  • Companies present all other components of net benefit cost outside operating income, if this subtotal is presented
  • Gross profit and operating income (and related margins) may change significantly for some companies
  • Because service cost is now the only component that can be capitalized, a company that capitalizes retirement benefit costs may need to change the way it determines the amount to be capitalized
  • A practical expedient makes it easier to retrospectively apply the ASU on adoption to net benefit cost for comparative periods by using amounts disclosed in the pension and other postretirement benefit plan footnotes


  • Listen to KPMG’s podcast here

Report contents

  • Why change the presentation?
  • Example: Transition with one comparative period
  • What else to consider when adopting



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