Page 126 - SBR Integrated Workbook STUDENT S18-J19

Chapter 9

Example 3

Defined benefit pension schemes

Byzantium operates a defined benefit pension scheme. The following details
relate to the pension scheme in the year ended 31 December 20X1:

$m

Present value of the obligation at 31 December 20X1 100
Present value of the obligation at 1 January 20X1 90

Fair value of plan assets at 31 December 20X1 76
Fair value of plan assets at 1 January 20X1 72

Current service cost 5
Contributions into the scheme by Byzantium 6
Pension benefits paid during the year 2

The interest rates available on good quality corporate bonds have been as
follows:

1 January 20X1 5%

31 December 20X1 4%

How should the scheme be accounted for in the year ended 31
December 20X1?

120