Prior service cost is amortized on a straight-line basis over the average remaining service life of active employees or 15 years, whichever is longer. years-of-service method or on a straight-line basis over the average remaining service life of active employees. straight-line basis over 15 years. straight-line basis over the expected future years of service.

years-of-service method or on a straight-line basis over the average remaining service life of active employees

Explanation:

Prior service cost (PSC) is simply defined is an instant hike or increase in PBO that is gotten or as a result of the retroactive application of hike or an increase in profits or benefits for service already given(rendered) the name "prior" service cost is given to it as a result of the service cost of previous years which was increased. An example, a defined benefit pension plan provides benefits equal to 4% of last salary for each year of service rendered. The plan is later worked on to increase the rate 4.23% and

the working on or amendment is is said to be retroactive. The present value of the increased benefits (.23%) earned prior to the adjustment or amendment is PSC. Sometimes, retroactive grant may lower the benefits for service already rendered. Amortization is an accounting technique. It is often used to constantly in a timely or periodic manner to reduce or lower the book value of a loan or intangible asset over a time period that is always set.

The amount to be amortized is gotten by giving equal amount of expense to each future period of service always for employee each and those who is mandated to receive benefits.