Applicant should have been well versed in the calculation of actuarial losses and gains on pensions. It would have been significant to ensure each item affecting liabilities and assets of the plan were entered into the correct column. The second part of part (a) required the calculation of the net pension liability or asset. This tested candidates' understanding of how the pension plan is reflected in the company's statement of financial position and it was important that candidates stated whether the net position was liability or asset.

Part (b) tested share-based expense. Although candidates would have been able to calculate the correct expense and On this occasion it was equity-settled, they were also required to appreciate the impact on the SOFP and record the journal entry with the credit going to equity/other reserves.

(a) Pension plan

(i) Actuarial gains and losses

(ii) Statement of financial position $000

Present value of pension plan liabilities at 31/12/12 6,500

Fair value of pension plan assets at 31/12/12 (6,300)

Net pension liability 200

Share-based payments

(i) Charge for the year

Year ended 31 December 2011

Eligible employees (400-35-80) = 285

Equivalent cost of options = 285 employees x 1,000 rights x FV$8 = $2,280,000

Allocate over 3 year vesting period $2,280,000/3 = $760,000 equivalent charge to the income statement in 2011.

Year ended 31 December 2012

Eligible employees (400-35-28-34) = 303

Equivalent cost of options = 303 employees x 1,000 rights x FV$8 = $2,424,000

Cumulative amount to be recognised within equity = $2,424,000 x 2/3 years = $1,616,000

Less amount previously recognised = $1,616,000 - $760,000 = $856,000

(ii) Journal

Journal entry required:

DR: Staff costs $856,000

CR: Equity (other reserves) $856,000