Schweser example on Employee Compensation: Post employment and share based

How do we calculate the current service cost in the example, explain with calculations.

The future value (as of expected retirement) of the service cost is the same each year; for example, if the employee needs $1,000,000 in her account at retirement and the company expects that she’ll work for 25 years, then the future value of each year’s service cost is $40,000 (= $1,000,000 ÷ 25).

The present value of the service cost (the current service cost) is that amount discounted back to the present at the discount rate chosen for the pension plan. So, at the end of the first year, with a discount rate of 8%, her first year’s current service cost would be $6,308 (= $40,000 / 1.0824). Her current year service cost in year 10 would be $12,610 (= $40,000 / 1.0815). And so on.

So for example if we have 15 benefit payments at the end of retirement year of 25630.30 how do we calculate the current service costs?

Figure out the amount you need in the account at retirement: the PV of an ordinary annuity of $25,630 for 15 years at whatever the discount rate is. Then divide that amount by the expected number of years the employee is expected to work. Then proceed as I outlined above.