YUM! Brands, Inc., discloses the following pension footnote in its \(10-\mathrm{K}\) report.

a. Explain the terms "service cost" and "interest cost."

b. How do actuarial losses arise?

c. The fair value of YUM!'s pension assets is \(\$ 945\) million as of 2012 . What is the funded status of the plan, and how will this be reflected on YUM!'s balance sheet?

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Pension Benefit Obligation ($ millions) Change in benefit obligation Benefit obligation at beginning of year. Service cost .... Interest cost.. Participant contributions. Plan amendments Curtailments.... PBO reduction in excess of settlement payments. Special termination benefits. Exchange rate changes Benefits paid...... Settlement payments Actuarial (gain) loss.... Benefit obligation at end of year 2012 $1,381 26 66 (10) 5 (74) 3 (14) (278) 185 $1,290 2011 $1,108 24 64 (7) 5 (11) (29) 227 $1,381