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Hi, Sir. I would like to ask about questions in bpp revision kit, pg 106 of the answers of interest on obligation & plan assets.
I know if want to find interest on obligation & plan assets, we need to use (%x b/d).
But if there is adjustment needed to be made, such as when to know whether added contribution or substract the benefit paid in the interest on obligation & plan assets???
Question given
1. Company contribution to the plan during the year amounted to $ 550,000. The contribution were paid at the start of the year.2. Pension paid to former employees amounted to $330,000. These were paid at the start of the year.
3. Corporate bond 8% at 01.02.2007
4. Year ended 31.01.2008
5. Opening plan assets were $3.6m & plan liabilities were $4.3m
6. Closing plan assets were $4.215m & plan liabilities were $ 4.215m
Use opening plan assets and liabilities and opening interest rate for exam purposes – unless something major happens in the middle of the year – e.g. a big company reorganisation.
Thank you, Sir. I’ve got it.
But, if I’m doing the interest on obligation, when did I know whether it has to minus out benefit paid after already included benefit paid in the CHANGES IN PV OF THE DEFINED BENEFIT OBLIGATION?
Eg. opening defined benefit obligation $4300
Interest on obligation (4300-330) x 8% $318
Benefit paid. $(330)In addition, for the interest on plan asset as well, when will I know whether it has to add in the contribution & benefit paid after already included both in the CHANGES IN THE FV OF PLAN ASSETS?
Eg. opening Fv of plan assets. $3600
Interest on plan assets [ (3600+550-330)x 8%] $318
Benefit paid. $(330)
Contributions $550.
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