Business and Personal Finance Dictionary

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• TRANSITION OBLIGATION
  
  An off-balance sheet liability created under FAS 87 rules when the PBO exceeds the amount of pension plan assets as of the date that FAS 87 rules are implemented. The amount of the off-balance sheet liability is the amount of the shortfall. This liability is amortized - usually over the projected remaining service lives for the employees expected to receive benefits. The amortization increases the reported benefit expense of the sponsoring firm. The unamortized remaining balance of the transition obligation is disclosed in a footnote to the financial statements as unrecognized initial net loss.
  
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