On 1 April 20X7, the present value of AB’s pension obligation is $1,634,000. The fair value of the pension plan assets is $1,337,000. Unrecognised actuarial losses are $224,000 as at 31 March 20X7. During the year to 31 March 20X8 the current cost if $450,000 and the contributions made totalled $520,000. The expected rate of return on assets was 10% and the interest cost was based on a rate of interest of 12%. The estimated remaining service lives of employees is 10 years. Round figures to the nearest $000.

(a) Calculate the income statement charge in respect of pensions for AB for the year ended 31 March 20X8, assuming that AB adopts the corridor approach under IAS 19.

(b) Briefly outline the alternative treatment permitted by IAS 19 in respect of actuarial gains and losses and show the extracts from the statement of comprehensive income of AB for the year ended 31 March 20X8, assuming the actuarial loss on pension assets in the year was $85,000 and the actuarial gain on pension obligations was $55,000.

Answer rating: 100% (QA)

a Income statement charge in respect of pensions for AB for the year ended 31 March 20X8 assuming th... View the full answer