What does the term "defined benefit obligation" refer to?

The term "defined benefit obligation" specifically refers to the total amount of future expected payments due to employees for their service, typically derived from a defined benefit pension plan. This obligation represents the amount that an organization estimates it will owe to employees upon their retirement, taking into account factors such as current salaries, expected salary increases, life expectancy, and the plan's specific benefit formula. This concept is crucial in pension accounting as it helps organizations assess their liabilities related to employee retirement benefits, ensuring that they make proper financial provisions and adhere to accounting standards.

The focus on future expected payments is essential because it encompasses all aspects of an employee’s entitlement based on their service, rather than just current payment amounts or isolated factors like performance or dividends.