You are the Chief Finance officer for Mazembe Limited, A company engaged in construction of apartments for third parties. Mazembe has 200 employees in total and the following transactions have arisen that require you advise on how they should be reported.

1. Mazembe operates a pension plan for employees where the company does not guarantee return on the contributions paid into the fund. Instead, the company’s obligation (legal or constructive) is limited to the amount contributed to the fund. On 31 December 2019, the company had fair value of plan assets amounting to K35 million, contributions paid by Mazembe into the fund amounting to K16 million and contributions paid by employees into the fund of K16 million. The interest rates on high quality bonds for Mazembe’s pension plan are: 7% on 1 January 2019 and 10% on 31 December 2019.                                                            

2. Mazembe has two receivables at 31 December 2019 that it has factored to a bank in return for immediate cash proceeds. Both receivables are due from long standing customers who are expected to pay in full and on time. Mazembe had agreed a three-month credit period with both customers.

The first receivable is for K400 million. In return for assigning the receivable, Mazembe has received K360 million from the factor. Under the terms of the factoring arrangement, Mazembe will not have to repay this money, even if the customer does not settle the debt.

The second receivable is for K200 million. In return for assigning the receivable, Mazembe has received K140 million from the factor. The terms of this factoring arrangement state that Mazembe will receive a further K10 million if the customer settles the account on time. If the customer does not settle the account in accordance with the agreed terms then the receivable will be reassigned back to Mazembe who will then be obliged to refund the factor with the original K140 million.    

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