Section 96 in The Companies (Accounting Standards) Rules, 2006
96. Past service cost excludes:
(a)the effect of differences between actual and previously assumed salary increases on the obligation to pay benefits for service in prior years (there is no past service cost because actuarial assumptions allow for projected salaries);(b)under and over estimates of discretionary pension increases where an enterprise has an obligation to grant such increases (there is no past service cost because assumptions allow for such increases);(c)estimates of benefit improvements that result from actuarial gains that have already been recognised in the financial statements if the enterprise is obliged, by either the formal terms of a plan (or an obligation that goes beyond those terms) or legislation, to use any surplus in the plan for the benefit of plan participants, even if the benefit increase has not yet been formally awarded [the resulting increase in the obligation is an actuarial loss and not past service cost, see paragraph 85(b)];(d)the increase in vested benefits (not on account of new or improved benefits) when employees complete vesting requirements (there is no past service cost because the estimated cost of benefits was recognised as current service cost as the service was rendered); and(e)the effect of plan amendments that reduce benefits for future service (a curtailment).
