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March/ June 2020 question 4, b), ii) defined benefit scheme

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › March/ June 2020 question 4, b), ii) defined benefit scheme

  • This topic has 3 replies, 2 voices, and was last updated 3 years ago by Stephen Widberg.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • February 19, 2022 at 12:41 pm #648897
    andreeagaitan101
    Participant
    • Topics: 6
    • Replies: 6
    • ☆

    Hi tutor,
    I’m trying to understand why the benefits paid out of the scheme (6 mil $) are not decreasing the net pension liability for the year. Mathematically speaking I understand, benefits paid out are cancelling themselves since they are part of both assets and liab computation… and when calculating the net liability it’s a – with a +.
    Nevertheless, when I’m trying to find the logic, I would have said that the benefits paid out are a release for the net pension liability, but defenitely I’m getting wrong with my logic. Do you think you could help me find the rationale in this regard?

    Many thanks.
    Andreea

    February 19, 2022 at 5:20 pm #648906
    Stephen Widberg
    Keymaster
    • Topics: 16
    • Replies: 3408
    • ☆☆☆☆☆

    Benefits will reduce the GROSS pension asset
    Benefits will reduce the GROSS pension liability

    NET pension liability is the NET of the above (both have gone down by the same amount)

    So, when you reconcile the NET liability – no need to take account of the benefits

    Is that OK?

    🙂

    February 19, 2022 at 9:38 pm #648912
    andreeagaitan101
    Participant
    • Topics: 6
    • Replies: 6
    • ☆

    Thanks a lot, got it!

    February 20, 2022 at 9:09 am #648947
    Stephen Widberg
    Keymaster
    • Topics: 16
    • Replies: 3408
    • ☆☆☆☆☆

    🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘March/ June 2020 question 4, b), ii) defined benefit scheme’ is closed to new replies.

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