OpenTuition Course Note Chapter 7 Example 3

Vvmyvmy16y ago

Can anyone advise why the cumulative unrecognised losses of 4m is added to 25 ? Why not minus from 25 ?

Afterall, the 25 is a Debit balance and losses should be Dr. SCI and Cr. Asset ? Am I right ?

Thanks for advise.

Kkingnasha16y ago#1

Hey,

No, you are not right with your entries. The question says unrecognized losses, and unrecognized gains or losses do not appear in the financial statements (only in disclosures), therefore they cant be recognized in the SCI.
Now for your question of why has the 4m been added to the asset value. This is because the asset value which is 25m has some unrecognized losses incorporated in it (FV of Plan Asset - PV of Obligation. When these are calculated the balancing figures is the gain/loss). So you add back the unrecognized loss figure.
Remember this per-forma for calculation purposes:

PV of Obligation XXX
(-)FV of Plan Asset (XXX)

=(Asset)/Liablity (XXX) / XXX
+/- Unrecog. gains/(losses) XXX / (XXX)

=Disclosed in SFP (Asset)/Liablity (XXX) / XXX

Vvmyvmy16y ago#2

Hi, thanks for your explanation but I still don't understand.

Isn't the 25m a gain due to Plan Asset is higher than Obligation ?

Kkingnasha16y ago#3

Yes, it is a asset because the value of the Plan Asset value is higher than the obligation.

Just use the per-forma for calculations and you will be just fine :)

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