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Sir, according to my study materials it wrote If a defined benefit plan is in surplus, IAS 19 states that the surplus must be measured at the lower of:
• the amount calculated as normal (per earlier examples and illustrations)
• the total of the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.
The amount is changed to OCI.so which one is the correct measurement???
What you are referring to is the Asset Ceiling test: a pension surplus should be carried at no more than its recoverable amount, which essentially equates to the present value of the cash savings from a reduction in future contributions or a refund either directly or indirectly. It stops companies hiding money away by having massively over-funded pension schemes.
So if in surplus the defined benefit asset would be restricted to the Asset Ceiling, with any write down required treated as a re-measurement and recognised in OCI
As for the double entry, I defer to Chris, but I guess you can’t touch the plan assets, so it must be an increase in the liability (so as to reduce the overall surplus) with the debit to OCI?
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