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Sir am struggling to understand how can a gain/loss arise on settlement? My study text states it is the difference between plan assets paid out and reduction in present value of defined benefit obligation. but i feel won’t the two be same?
like won’t my pension fund transfer as much plan assets as are the plan obligation relating to the employee?
Obligation is 100 – but it’s a theoretical number that few understand, certainly not most of the staff
Amount paid to settle 60 – down to negotiation – employees in a weak position
Gain 40 – I guess that’s capitalism.
But all you have to do is post the double entry. 🙂
so the journal entry of this would be,
Dr. Net Pension obligation 100
Cr. SPL gain 40
Cr. cash 60
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