Pensions Accounting Tutorial: Solution

1.

2016 2017 2018

Step 1: Change in Obligation (Liability)
PV of Obligation at 1 January 1,000 2,230 2,980
Interest Cost (10%) 100 223 298
Current Service Cost 260 280 280
Past Service Cost - 20 -
Benefits Paid (225) (260) (280)
Actuarial (gain)/loss BAL FIG 1,095 487 (118)
PV of Obligation at 31 Dec 2,230 2,980 3,160

Step 2: Change in Assets

FV of plan assets at 1 January 1,000 2,325 2,700
Exp return on plan assets (12%) 120 279 324
Contributions 205 225 225
Benefits Paid (225) (260) (280)
Actuarial gain/(loss) BAL FIG 1,225 131 31
FV of plan assets at 31 Dec 2,325 2,700 3,000

Step 3: SPL (IS) extract

Operating Cost: 260 280 280
Current service cost
Past service cost 20
Finance Cost: 100 223 298
Interest Cost
Expected return on plan assets (120) (279) (324)
SoCI (IS) charge 240 244 254

OCI:
Recognised actuarial gains (losses) (1225-1095) 130 (131-487) (356) (31+118) 149

Step 4: SFP (B/S) extract

FV of Assets 31 Dec 2,325 2,700 3,000
PV of Obligation 31 Dec (2,230) (2,980) (3,160)
Asset (Liability) in SFP (B/S) 95 (280) (160)