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Hello,
I have a question regarding curtailement with settlement. So for example, employees are offered basic settlement when they are made redundant. This will decrease the future liability as it will be less people and increase profit. How we account for the compensation payment made? Does it go through the P&L again? Or it is paid by the pension scheme and not by the company?
Usually, what will be the net impact on the result when there is curtailement with settlement? Profit or loss?
Thanks a lot! I really appreciate your help!The pension plan will make the payment, reducing it’s assets and liabilities
BUT NOT NECESSARILY BY THE SAME AMOUNT
If I owe you 100 payable in 5years, you may be willing to take 40 now. Who wants to wait 5 years when they have bills to pay now?
So there will be a gain or sometimes a loss for the company, which is accounted for as a past service cost.
Dr liability 100
Cr asset 40
Cr p&l 60🙂
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