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BPP Book illustration 2 Defined benifit plan,pg 87

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › BPP Book illustration 2 Defined benifit plan,pg 87

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • June 28, 2018 at 3:42 pm #460458
    ashiktamot
    Member
    • Topics: 10
    • Replies: 0
    • ☆

    Deat Richard,

    in this ilustration past service cost i,e gain on curtailment is calculated as 12-9=3 leading to decrease in pension plan liability by 3 only,,,, why is 9 ,the benefit payment deducted to decrease the liability where this benefit payment has net effect i,e it reduces both pension liability ans asset i,e
    Dr pension plan liability 9
    cr pension plan asset 9
    further more the reduction in employees lead to reduction in liability leading to a gain i,e
    Dr, pension plan liability 12
    cr P/L Gain 12
    thus the pension plan obligation is decreased by 12 plus 9 so why 3 is calculated?,,
    plz explain

    July 2, 2018 at 9:28 pm #460758
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7228
    • ☆☆☆☆☆

    Hi,

    The reduction in the scheme liability is not as you suggest above. The entry required is:

    DR Liability $12 million
    CR Bank $9 million
    CR SPL $3 million (balancing figure)

    Thanks

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