Reference no: EM133034668
Question - PPF Inc., offers a defined benefit pension plan. You, CPA, have recently been hired as controller at PPF. It's January 2018 and you are finalizing the December 31, 2017 financial statements under IFRS before the auditors arrive to do their year-end field work. The CFO pops into your office and mentions that he just received the actuarial report for the pension plan but does not have time to look at it. He asks if you could please review the documents and assist him with the requirements set out below. You smile, excited to use your pension knowledge from University, and get to work.
The actuarial report includes the following information:
Defined benefit obligation at December 31, 2016 $1,500,000
Fair value of plan assets at December 31, 2016 $996,500
Current service cost (earned evenly over 2017) $320,000
Benefit payments from plan (paid evenly throughout 2017) $40,000
Contributions to fund plan (contributions made evenly throughout 2017) $200,000
Defined benefit obligation at December 31, 2017 $1,900,000
Fair value of plan assets at December 31, 2017 $1,200,000
Discount rate 8%
Notes from CFO:
- All contributions to the plan have been booked accurately in PPF's records; however, no other adjustments have been made. So the net defined benefit obligation is currently showing as $303,500 on the 2017 statements.
- 2016 audited financial statements showed "Net defined benefit obligation $503,500"
Required - Calculate the following (please show all work):
a) Interest on the defined benefit obligation for the 2017 year.
b) Interest income on Plan Assets for the 2017 year.
c) Actuarial gains/losses on the defined benefit obligation for the 2017 year.
d) Net defined benefit asset/liability that should be on the December 31, 2017 financial statements. (Note: no reconciliation is required).