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gain/loss on settlement

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › gain/loss on settlement

  • This topic has 4 replies, 2 voices, and was last updated 4 years ago by Stephen Widberg.
Viewing 5 posts - 1 through 5 (of 5 total)
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  • June 1, 2021 at 2:18 am #622524
    Noah098
    Member
    • Topics: 935
    • Replies: 352
    • ☆☆☆☆☆

    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?

    June 1, 2021 at 11:55 am #622605
    Stephen Widberg
    Keymaster
    • Topics: 16
    • Replies: 3411
    • ☆☆☆☆☆

    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. 🙂

    July 10, 2021 at 9:40 am #627335
    Noah098
    Member
    • Topics: 935
    • Replies: 352
    • ☆☆☆☆☆

    so the journal entry of this would be,

    Dr. Net Pension obligation 100
    Cr. SPL gain 40
    Cr. cash 60

    July 10, 2021 at 9:42 am #627340
    Noah098
    Member
    • Topics: 935
    • Replies: 352
    • ☆☆☆☆☆

    right sir?

    July 11, 2021 at 9:24 am #627426
    Stephen Widberg
    Keymaster
    • Topics: 16
    • Replies: 3411
    • ☆☆☆☆☆

    Perfect

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