Impact of Discount Rate on Defined Benefit Plans

Company XYZ has a defined benefit plan that calculates retirement benefits based on the employee's years of service, final average salary, and a predetermined benefit formula. Recently, the actuary for the plan reported that the projected benefit obligation (PBO) increased significantly due to a reduction in the discount rate used to calculate the present value of future benefits. As an analyst, you need to understand the implications of this change on the financial statements.

Which of the following statements about the impact of the decrease in the discount rate on the defined benefit plan's financial reporting is correct?