Page 122 - SBR Integrated Workbook STUDENT S18-J19
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Chapter 9
Defined contribution plans
2.1 Accounting for defined contribution plans
The entity should charge the agreed pension contribution to profit or loss as an
employment expense in each period.
The expense of providing pensions in the period is often the same as the amount of
contributions paid. However, an accrual or prepayment arises if the cash paid does
not equal the value of contributions due for the period.
Example 2
Defined contribution pension schemes
Roper makes contributions to the defined contribution pension fund of
employees at a rate of 10% of gross salaries. For convenience, the entity pays
$50,000 per month into the pension scheme with any balance being paid in
the first month of the following accounting year. The wages and salaries for
20X6 are $7 million.
Calculate the pension expense for 20X6, and the accrual/prepayment at
the end of the year.
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