(a) Explain the following as used in IAS 19 Employee Benefits:(i) The term 'defined benefit pension plan'.(ii) The basis to be adopted in measuring scheme assets.(b) Benson Ltd. operates a defined benefit scheme for its employees. At June 2011, the netpension liability reco gnized in the statement of financial position was $18 million, excludingan unrecognized actuarial gain of $15 million which Benson Ltd. wishes to spread over theremaining working lives of the employees. The scheme was revised on 1 June 2011. Thisresulted in the benefits being enhanced for some members of the plan and because benefitsdo not vest for these members for five years, Johnson wishes to spread the increased costover that period. However, part of the scheme was to be closed, without any redundancy ofemployees. Benson Ltd. requires advice on how to account for the above scheme under IAS19 Employee Benefits including the presentation and measurement of the pension expense.Required:Discuss, with suitable computations, the advice that should be given to Johnson inaccounting for the above events.

IAS 19 stands for the purpose of providing guidelines for the accounting processes and disclosures…

Answered: (a) Explain the following as used in…

(a) Explain the following as used in IAS 19 Employee Benefits: (1) The term 'defined benefit pension plan'. (ii) The basis to be adopted in measuring scheme assets.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

(a) Explain the following as used in IAS 19 Employee Benefits:
(i) The term 'defined benefit pension plan'.
(ii) The basis to be adopted in measuring scheme assets.
(b) Benson Ltd. operates a defined benefit scheme for its employees. At June 2011, the net
pension liability reco gnized in the statement of financial position was $18 million, excluding
an unrecognized actuarial gain of $15 million which Benson Ltd. wishes to spread over the
remaining working lives of the employees. The scheme was revised on 1 June 2011. This
resulted in the benefits being enhanced for some members of the plan and because benefits
do not vest for these members for five years, Johnson wishes to spread the increased cost
over that period. However, part of the scheme was to be closed, without any redundancy of
employees. Benson Ltd. requires advice on how to account for the above scheme under IAS
19 Employee Benefits including the presentation and measurement of the pension expense.
Required:
Discuss, with suitable computations, the advice that should be given to Johnson in
accounting for the above events.

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