Questions, Exercises, Problems, nd Cases 9.12 Components of Pension Expense. Pension expense typically consists of LO 9-4 five components. Answer the following questions related to each component. a. Service cost: Is it possible for the service cost component to reduce pension expense for b. Interest cost: Is it possible for the interest cost component to reduce pension expense for c. Expected return on plan assets: U.S. GAAP requires firms to reduce pension expense each d. Amortization of prior service cost: What is a prior service cost? Provide an example of a e. Amortization of actuarial gains and losses: What circumstances give rise to actuarial gains the year? Explain your answer. the year? Explain your answer. year by the expected, not the actual, return on investments. What is the logic employed by policy makers in reaching this decision? plan change that would generate an amount labeled prior service cost. and losses