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P2-D2.
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herocomesalong
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Good day tutor,
I have some doubts in a small part of this question: December 2010 Question 1- Jocatt co (Group Statement of cash flows)
This part deals with a defined benefit scheme and goes like this:
” Jocatt operates a defined benefit scheme. The current service costs for the year ended 30 November 2010 are $10 million. Jocatt enhanced the benefits on 1 December 2009 however, these do not vest until 30 November 2012. The total cost of the enhancement is $6 million. ”In the consolidated SOCF, the answer accounted for the full $6m of the enhancement costs.
However, given that the benefits would not vest till 3 years later and hence the $6m is not a past service cost, shouldn’t we spread the $6m over 3 years instead?
Looking forward to your reply, thanks a lot.
P2-D2
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Hi,
It is a past service cost and hence would be recognised immediately. The fact they vest in the future is irrelevant.
Thanks
herocomesalong
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