Homework week 4: Radost Defined Benefit

a. Notes to the statement of Profit and Loss and other comprehensive income

1. Profit and Loss

Current service cost: $3.75m

Past service cost: ($6m)

Net interest income: $4.5 - $5.2m = ($0.7m)

 Loss: ($2.95m)

2. Other comprehensive income: Remeasurements of defined benefit plans

Loss on Defined benefit obligation: $4.75m

Return on plan assets: $2.97m

 Loss: $1.78m

Notes to the statement of financial position

1. Net defined benefit asset recognized in the statement of financial position

Fair value of defined benefit plan: $64.17m

Present value of defined benefit obligation: ($44m)

 Net asset: $20.17m

2. Changes in the present value of defined benefit obligation

Opening defined benefit obligation: $45m

Interest: $45m x 10$ = $4.5m

Current service cost: $3.75m

Past service cost: ($6m)

Benefits paid: ($8m)

Actuarial Loss on remeasurement recognized in OCI: $4.75m

 Closing defined benefit obligation: $44m

 3. Change in fair value of defined benefit plan

Opening Fair Value: $52m

Interest: $52m x 10% = $5.2m

Contribution: $12m

Benefits paid: ($8m)

Actuarial Gain on remeasurement recognized in OCI : $2.97m

 Closing Fair Value: $64.17m

b. According to IAS 19 Employee Benefits, plan assets of a post-employment benefit plan must be held
by an entity that is legally separate from the reporting entity therefore, the Radost defined benefit
pension scheme is held by a separate legal trust to meet the requirement. Furthermore, under IAS 19,
an entity is also required to recognise the defined benefit liability/asset in its statement of financial
position (paragraphs 140-144).