Defined Benefit Pension Reporting – Chapter 19 – Assignment Set

British Properties Limited (BPL) has an employer funded defined benefit pension plan and
has adopted the provisions of IFRS 19 permitting immediate recognition of pension plan
contract changes and performance.

The following data is gathered for the year ended December 31, 2013. In this and all
models studied at this introductory level, assume the current service cost, benefits paid and
plan funding occur at the end of the period. In reality, all of these would be averaged during
the period and the resulting expected asset return and interest cost would be calculated
accordingly.

Rate provided by the Actuary in deriving the Benefit Obligation and provided by Fund
Manager in providing the expected return on Plan Assets...........4.0%

Defined Benefit Obligation:

Balance at January 1, 2013........................$11,275,000
Current service cost................................... 400,000
Additional spousal survival benefits,
effective, Jan.1, 2013...... 100,000
Actuarial revision to obligation arising
from slower than projected employee
turnover (fewer people quitting).................. 140,000

Plan Assets:
Balance at January 1, 2013.........................$9,062,500
Actual return on plan assets, net expenses.... 425,000
Funding to the plan, at year end................. 575,000
Benefits paid............................................. 300,000
Required:
1. Prepare the pension expense and funding entries for 2013. Show all supporting
calculations. Assume BPL reports pension expense relating to normal net income as
one line item. Round amounts to the nearest dollar; no cents.
2. What would be reported on the Statement of Financial Position at December 31,
2013 in respect of the pension? How would it be classified, described and note
referenced?

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 Defined Benefit Pension Reporting – Chapter 19 – Assignment Set

Items Experience Annual Cash Accrued Defined Plan Assets

Gains/Loss Pension pension Benefit
OCI Expense liability/ Obligation
asset
Balance, Jan 1 2,212,500c1 11,275,000c 9,062,500d
Service cost 400,000d 400,000c
Plan enhance 100,000d 100,000c
Interest2 455,000d 455,000c
Expected rtn.3 362,500c 362,500d

Gain4 62,500c 62,500d

Loss 140,000d 140,000c

Funding 575,000c 575,000d

Benefits paid 306, 250d 306,250c

Totals 77,500d 592,500d 575,000c 12,070,000c 9,772,500d

New balance 2,307,5005
Required #1:

Journal entry work up Pension Plan Positions

c = credit
d = debit

1
calculated; difference between plan assets and obligation
2
($11,275,000 + $100,000) x 4% = $455,000
3
$9,062,500 x 4.0% = $362,500
4
$425,000 - $362,500 = $62,500
5
$2,212,500 + $592,500 + $77,500 - $575,000 = $2,307,500

Entry:
Dr. Pension expense................................$592,500 (to normal income)
Cr. Other Comprehensive income (loss)........$77,500 (non-recyclable)
Cr. Accrued pension liability..................................$670,000

Dr. Accrued pension liability...........$575,000

Cr. Cash.....................................................$575,000 (transferred to the pension plan)

Required #2:
The balance sheet would report, as a non-current liability an account described, variously,
as Accrued Benefit Liability (Note X)..................$2,307,500

Note X would describe the pension plan and indicate the balances of the Defined Benefit
Obligation and Plan Assets. The net of the two balances is called the funded status.

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 Defined Benefit Pension Reporting – Chapter 19 – Assignment Set

Shoppers Drug Mart: Provide note references where applicable.

What is the Deferred benefit liability (same as Accrued Pension Liability) for Shoppers at the
end of 2011 that is included as part of long term liabilities and what are the balances in
pension obligation and plan assets that comprise the net balance?

Refer note # 21: The Deferred benefit liability is $38,104 comprised of (000):
Pension obligation.....................($146,720)
Plan assets.............................. $108,616
($38,104)

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