Densu Ltd, a public limited company, is a leading manufacturer of agricultural equipment. The company would...

 

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Densu Ltd, a public limited company, is a leading manufacturer of agricultural equipment. The company would like advice on how to treat certain items under IAS 19 Employee benefits. The company operates the Densu Pension Plan B which commenced on 1 January 2016 and the Densu Pension Plan A, which was closed to new entrants from 31 December2015, but which was open to future service accrual for the cemployees already in the scheme. The assets of the schemes are held separately from those of the company in funds under the control of trustees. The following information relates to the two schemes. Densu Pension Plan A The terms of the plan are as follows. (i) Employees contribute 6% of their salaries to the plan. (i) Densu contributes, currently, the same amount to the plan for the benefit of the employees. (iii) On retirement, employees are guaranteed a pension, which is based upon the number of years service with the company and their final salary. The following details relate to the plan in the year to 31 December2016: GHSM 400 445 Present value of obligation at 31 December2016 Fair value of plan assets at I January 2016 Fair value of plan assets at 31 December2016 Current service cost Pension benefits paid Total contributions paid to the scheme for year to 31 December2016 390 425 22 18 19 Re-measurement gains and losses are recognised in accordance with IAS 19. Densu Pension Plan B Under the terms of the plan, Densu does not guarantee any return on the contributions paid into the fund. The company's legal and constructive obligation is limited to the amount that is contributed to the fund. The following details relate to this scheme: GHSM Fair value of plan assets at 31 December2016 Contributions paid by company for year to 31 December2016 Contributions paid by employees for year to 31 December2016 20 9.5 9.5 The interest rate on high quality corporate bonds for the two plans are: 1 January 2016 5% 31 December2016 6% The company would like advice on how to treat the two pension plans, for the year ended 31 December 2016, together with an explanation of the differences between a defined contribution plan and a defined benefit plan. Required () Discuss the nature of and differences between a defined contribution plan and a defined benefit plan with specific reference to the company's two schemes. (i) Show the accounting treatment for the two Densu pension plans for the year ended 31 December2016 under IAS 19 Employee benefits. Densu Ltd, a public limited company, is a leading manufacturer of agricultural equipment. The company would like advice on how to treat certain items under IAS 19 Employee benefits. The company operates the Densu Pension Plan B which commenced on 1 January 2016 and the Densu Pension Plan A, which was closed to new entrants from 31 December2015, but which was open to future service accrual for the cemployees already in the scheme. The assets of the schemes are held separately from those of the company in funds under the control of trustees. The following information relates to the two schemes. Densu Pension Plan A The terms of the plan are as follows. (i) Employees contribute 6% of their salaries to the plan. (i) Densu contributes, currently, the same amount to the plan for the benefit of the employees. (iii) On retirement, employees are guaranteed a pension, which is based upon the number of years service with the company and their final salary. The following details relate to the plan in the year to 31 December2016: GHSM 400 445 Present value of obligation at 31 December2016 Fair value of plan assets at I January 2016 Fair value of plan assets at 31 December2016 Current service cost Pension benefits paid Total contributions paid to the scheme for year to 31 December2016 390 425 22 18 19 Re-measurement gains and losses are recognised in accordance with IAS 19. Densu Pension Plan B Under the terms of the plan, Densu does not guarantee any return on the contributions paid into the fund. The company's legal and constructive obligation is limited to the amount that is contributed to the fund. The following details relate to this scheme: GHSM Fair value of plan assets at 31 December2016 Contributions paid by company for year to 31 December2016 Contributions paid by employees for year to 31 December2016 20 9.5 9.5 The interest rate on high quality corporate bonds for the two plans are: 1 January 2016 5% 31 December2016 6% The company would like advice on how to treat the two pension plans, for the year ended 31 December 2016, together with an explanation of the differences between a defined contribution plan and a defined benefit plan. Required () Discuss the nature of and differences between a defined contribution plan and a defined benefit plan with specific reference to the company's two schemes. (i) Show the accounting treatment for the two Densu pension plans for the year ended 31 December2016 under IAS 19 Employee benefits.

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i A defined contribution plan is a pension plan in which the employer andor employees contribute a s... View the full answer