Service cost is the increase in the discounted present value of the pension benefits ultimately payable that is attributable to an additional year's employment.

Service Cost

The portion of the cost of a pension or other post-employment benefit plan attributed to services rendered by employees in the current period.

Discounted Present Value

The process of determining the present value of a future amount of money or stream of cash flows given a specified rate of return.

Additional Year's Employment

The extension of an employee's service period by one year, often affecting benefits and pension calculations.