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Dear Tutor, in defined benefit scheme, cash contribution $6 million to this pension scheme, how to make this double entry for this transaction? many thanks
Thanks, but in an question, its double entry like that: Dr Pension assets; Cr P/L, would you please help me what situation could cause this kind of double entry?
Many thanks
It could be that the client has made an error:
ERROR Dr P&L Cr Cash
CORRECTION Dr Pension asset Cr P&L🙂
Thanks, however I have to type all relevant question in here:
Bubble operates a defined benefit scheme for its employees but has yet to record anything for the current year except to expense the cash contribution which were $6 million. the opening position was a net liability of $15 million which is included in the non-current liabilities of Bubble in its draft financial statements. Current service costs for the year were $5 million and interest rates on good quality corporate bonds fell from 8% at the start of the year to 6% by 31/10/2005. in addition, a payment of $3 million was made out of the cash of the pension scheme in relation to employees who left the scheme. the reduction in the pension scheme liability as a result of the curtainment was $4 million. the actuary has assessed that scheme is in deficit by $17 million as at 31/10/2005.The answer relevant to cash contribution said that : the cash contributions of $6 million will need to be reversed from P/L and will reduce the net obligation on the pension scheme.
would you please explain what it is? many thanks
opening liability $15 m
net interest cost ($15mx8%) $1.2 m
Current service cost $5m
Gain on curtainment ($4m-$3m) ($1m)
Cash contribution ($6m)
subtotal $14.2
Loss on remeasurement $2.8
Closing liability $17mCorrect double entry:
Debit: OCI (and OCE) $2.8m
Credit: P/L 1.2+5-6-1 $0.8m
Credit: Non-current liabilities $2m” operates a defined benefit scheme for its employees but has yet to record anything for the current year except to expense the cash contribution which were $6 ”
Expensing contributions is a BAD THING TO DO. So we are REVERSING the expense.
Watch our pension lecture again to review DB schemes.
Try not to copy and paste whole questions in this forum. 🙂
Dear Stephen, many thanks! I will not do it, but actually I type them manually one by one.
Another question is that is the expensing contributions an another normal treatment for DB schemes?
The answer that you gave me previously mentioned error, do you think expensing contribution in P/L was mistake, and later correction by revering the expense.
Do I understand in right way?Best Regards
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