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May I ask how to better to understand the pension assets and liabilities??
Why need to be splitted into assets and liabilities?
Why service fee included in the liabilities only??
Thank you.The plan asset and the Defined benefit obligation (liability) are two different items.
In fact, in the statement of Financial position they are not stated separately but they are offset against one another giving rise to a :
– Net Defined Benefit Liability (Deficit)
or
– Net Defined Benefit asset (surplus)The services costs increase the obligation that you will have to pay when your employees retire. Therefore it makes sense that this just affect the liability.
Hopefully this is clear.
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