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hi sir,
i am a little confused about a note which referred to pension plan
note : the pension plan will make a lump sum payment totaling $ 8 m to the employees who accept voluntary redundancy for termination of their rights under the plan. Epsilon will pay this amount into the plan on 31 January 2009. the actuaries have advised that the accumulated pension rights that this payment will extinguish have a present value of $ 7 m and this sum is unlikely to alter significantly before 31 January 2009.
Year end 30 September 2009.
Dr present value obligation 7 m
Dr OCI 1 m
Cr cash 8 mare these right accounting entries ? i dealt with it as a settlement.
thank you in advance
I would have thought Dr P&L not OCI.
Where is this question in materials? I am sure I recognise the name.
It’s is from practise kit on Diploma ifrs bpp.
I debited the oci because the voluntary redundancy is on the terms of the plan. According to the book we must recognize any gain or loss in P/L only if the curtailment or the termination of the plan wasn’t in the terms of the plant.Correct me if I am wrong.
Set as exam question in 2008.
I’ve looked at the ACCA answer which, like me, says that that the 1 goes to P&L.
Any adjustment that sounds like past service or settlement or termination – always in P&L
” a settlement occurs either when an employer enters into a transaction to eliminate part or all of its post employment benefit obligation, other than a payment of benefits to or on behalf of employees under the terms of the plan and included in the actuarial assuptions”
This paragraph is from the book of bpp and of i am not wrong the note corresponds to the second part of the paragraf. Please explain to me what is the difference in the treatment?
Please let me know whether this is from workbook or P&R kit and give me a page number
I don’t teach the Diploma but it usually the same standard as SBR.
The best I can do is say that it always goes to P&L and support this from the PWC website:
A settlement is defined as ‘a transaction that eliminates all further legal or constructive obligations for part or all of the benefits provided under a defined benefit plan’ (other than benefit payments). [IAS 19 para 8]. Settlement gains or losses are recognised in the income statement when the settlement occurs. (PWC)
So, if I was you, I would move on!
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