- 5 Marks
CR – May 2021 – L3 – Q3a – Defined Benefit Scheme Accounting
Recommend the correct accounting treatment of defined benefit scheme transactions for Meagya Ltd.
Question
Meagya Ltd is a government business entity in Ghana. Meagya Ltd operates a defined benefit scheme which at 31 December 2019 was in deficit by GH¢120 million. Details for the current year are as follows:
| GH¢’million | |
|---|---|
| Current service cost | 55 |
| Cash contribution to the scheme | 100 |
| Benefits paid in the year | 80 |
| Net loss on curtailment | 11 |
| Gain on remeasurement of liability at 31 December 2020 | 9 |
The rate of interest applicable to corporate bonds was 5% at 31 December 2019. The cash contributions for the scheme have been correctly accounted for in the financial statements for the year ended 31 December 2020. This is the only adjustment that has been made in respect of the scheme.
Required:
Recommend the correct accounting treatment of the above transactions to the directors of Meagya Ltd in the financial statements for the year ended 31 December 2020, including financial statements extracts in accordance with IAS 19: Employee Benefits.
Find Related Questions by Tags, levels, etc.
- Tags: Defined Benefit Plan, IAS 19, Net liability, Remeasurement, Service Cost
- Level: Level 3
- Topic: IAS 19: Employee Benefits
- Series: MAY 2021