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Hi sir,
Whats the differences in treatement in calculations between
Pensions paid to former employees “at start of the year”
And
Pensions paid to former employees “during the year”
Thanks
2) for interest component
Should we multiply the high quality bond % to only opening balance ?
I saw in an example in bpp kit
its multiplied to (opening balance – past service cost + contribution )Plz clarify this also
Hi,
There is no difference in treatment for the payments made to former employees. We will reduce the liability and reduce the asset.
The interest rate is applied to the opening balances of both the asset and liability, to give the return on assets and interest expense respectively. If the past service cost arises at the start of the year then this must be unwound too, and so the interest rate is applied to this balance also to calculate the total interest cots in profit or loss.
I’m not sure which example you are talking about and I’d not try to create a formula for this part of the syllabus. Use debits and credits and read the question carefully.
Thanks
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