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Corporate Accounting and Auditing · Employee Benefits (Ind AS 19)

Remeasurements, OCI and Journal Entries for Defined Benefit Plans

Updated 10 October 2026 · Fact-checked

Under Ind AS 19, remeasurements of the net defined benefit liability (asset) go to other comprehensive income and are never reclassified to profit or loss. They are actuarial gains and losses, return on plan assets excluding interest, and asset ceiling changes. Service cost and net interest go to profit or loss.

Understand Remeasurements, OCI and Journal Entries for Defined Benefit Plans

A defined benefit plan leaves the employer with a net defined benefit liability (asset). It equals the present value of the defined benefit obligation (DBO) minus the fair value of plan assets, adjusted for any asset ceiling. Each year this balance changes. Ind AS 19 splits the change into parts and puts each part in the right statement.

Para 120 gives the rule. Service cost and net interest on the net liability (asset) go to profit or loss. Remeasurements go to other comprehensive income (OCI). Para 122 says remeasurements recognised in OCI are not reclassified to profit or loss later. The entity may transfer them within equity.

Para 127 says remeasurements comprise three items: actuarial gains and losses; return on plan assets, excluding amounts included in net interest; and any change in the effect of the asset ceiling, excluding amounts in net interest. Actuarial gains and losses arise from changes in actuarial assumptions and experience adjustments, for example a change in the discount rate, salary growth or employee turnover (para 128).

Net interest is found by multiplying the net defined benefit liability (asset) at the start of the year by the discount rate (para 123A). Contributions and benefit payments during the year are also taken into account. Interest income on plan assets is the opening fair value of plan assets times the same discount rate (para 125). The difference between this interest income and the actual return on plan assets is a remeasurement (para 125). So a plan asset return above interest income is a gain in OCI; below it is a loss in OCI.

Plan amendments, curtailments and settlements are different. Para 129 says changes in the DBO from these events are not actuarial gains or losses. They give past service cost or gains or losses on settlement, which go to profit or loss. To measure them, remeasure the net liability using current fair value of plan assets and current assumptions, before and after the event (para 99).

Key rules to remember

Net defined benefit liability (asset)
PV of DBO − Fair value of plan assets (adjusted for any asset ceiling)
Para 57. A positive result is a liability; a negative result is an asset, subject to the ceiling.
Net interest
Opening net defined benefit liability (asset) × Discount rate
Para 123A. Use the opening balance and discount rate, adjusted for contributions and benefit payments during the year. Goes to profit or loss.
Interest income on plan assets
Opening fair value of plan assets × Discount rate
Para 125. Adjust for contributions and payments during the year.
Remeasurement on plan assets
Actual return on plan assets − Interest income on plan assets
Para 125 and 127(b). Gain in OCI if positive, loss if negative.
Actuarial gain or loss on DBO
Closing DBO (actual) − Closing DBO expected from opening DBO + current service cost + interest cost − benefits paid
Balancing figure. An increase in DBO beyond expectation is a loss. Taken to OCI.
Where each item goes
Service cost, past service cost, settlement gain/loss, net interest → P&L; Remeasurements → OCI
Paras 120 and 129. OCI items are not reclassified to P&L (para 122).

How to solve Remeasurements, OCI and Journal Entries for Defined Benefit Plans questions

Use one fixed sequence for any defined benefit numerical. Build the DBO and plan asset reconciliations first, then pick out the P&L and OCI items.

  1. 1Write the opening DBO, opening plan assets and the discount rate. Find the opening net liability (asset).
  2. 2Compute current service cost as given. Compute interest cost on DBO and interest income on plan assets, both at the opening discount rate. Adjust for contributions and benefit payments if the question gives their timing.
  3. 3Compute net interest as interest cost minus interest income. It equals opening net liability times the rate when there are no mid-year flows.
  4. 4Prepare the DBO reconciliation: opening + current service cost + interest cost + past service cost − benefits paid ± actuarial loss or gain = closing DBO. Find the actuarial figure as the balancing item if closing DBO is given.
  5. 5Prepare the plan asset reconciliation: opening + interest income + contributions − benefits paid ± remeasurement = closing assets. The remeasurement is actual return minus interest income.
  6. 6Classify. Service cost, past service cost, settlement result and net interest go to profit or loss. Actuarial gains or losses and the plan asset remeasurement go to OCI.
  7. 7Write the journal entries and show the closing net liability (asset) that appears in the balance sheet.

Quickest way: Three-bucket shortcut

When to use it: Use this when the question gives closing DBO and closing plan assets and asks only for the P&L charge, the OCI amount or the entries.

  1. Compute the P&L charge: current service cost + past service cost + net interest (opening net liability × rate).
  2. Compute the total change in net liability: closing net liability − opening net liability − P&L charge + employer contributions. Benefits paid from plan assets do not change the net liability.
  3. The remaining movement is the total remeasurement for OCI. A positive amount is a loss; a negative amount is a gain.
  4. Check the three parts: opening net liability + P&L charge + OCI loss − contributions = closing net liability.

Common mistakes in Remeasurements, OCI and Journal Entries for Defined Benefit Plans

  • Taking actuarial gains and losses to profit or loss

    Students remember the older practice of spreading or expensing them.

    Fix: Under Ind AS 19, remeasurements go to OCI (para 120(c)). Recycling to profit or loss later is not allowed (para 122).

  • Treating the whole actual return on plan assets as OCI

    The term return on plan assets sounds like one item.

    Fix: Only the excess or shortfall over interest income is in OCI. Interest income at the discount rate is part of net interest in profit or loss.

  • Using the expected return on assets instead of the discount rate

    Old standards used an expected return assumption.

    Fix: Interest income on plan assets is opening fair value × the discount rate (para 125). Use the discount rate for both DBO and assets.

  • Calling past service cost or settlement results an actuarial loss

    All of them change the DBO, so they look the same.

    Fix: Para 129 excludes plan amendments, curtailments and settlements from actuarial gains and losses. These go to profit or loss.

  • Using the closing balance to compute net interest

    Students apply the rate to the latest figure they have.

    Fix: Use the opening net liability and opening discount rate (para 123A), adjusted only for contributions and benefit payments made during the year.

  • Ignoring benefits paid in the reconciliation

    The payment appears in the question as a small line item.

    Fix: Reduce both the DBO and plan assets by benefits paid from the plan. The net liability is then unchanged by that payment.

Worked examples

Example 1

Sundaram Textiles Ltd has a gratuity plan. On 1 April 2026: DBO ₹50,00,000; plan assets ₹40,00,000; discount rate 10%. During 2026-27: current service cost ₹6,00,000; contribution paid ₹5,00,000 on 31 March 2027; benefits paid from plan ₹3,00,000 on 31 March 2027; actual return on plan assets ₹4,50,000. Closing DBO is ₹58,00,000. Compute the P&L charge, the OCI remeasurements and the closing net liability. Assume the flows occur at year end.

Show the solution
  1. Opening net liability = 50,00,000 − 40,00,000 = ₹10,00,000.
  2. Interest cost = 50,00,000 × 10% = ₹5,00,000. Interest income = 40,00,000 × 10% = ₹4,00,000. Net interest = ₹1,00,000, which equals 10,00,000 × 10%.
  3. P&L charge = current service cost 6,00,000 + net interest 1,00,000 = ₹7,00,000.
  4. DBO reconciliation: 50,00,000 + 6,00,000 + 5,00,000 − 3,00,000 = 58,00,000 before actuarial items. Closing DBO is 58,00,000, so the actuarial gain or loss is nil.
  5. Plan assets: opening 40,00,000 + interest income 4,00,000 + contribution 5,00,000 − benefits 3,00,000 = 46,00,000 before remeasurement. Actual return is 4,50,000, so remeasurement = 4,50,000 − 4,00,000 = ₹50,000 gain. Closing assets = 46,00,000 + 50,000 = ₹46,50,000.
  6. Closing net liability = 58,00,000 − 46,50,000 = ₹11,50,000.
  7. Check: 10,00,000 + 7,00,000 P&L − 50,000 OCI gain − 5,00,000 contribution = 11,50,000. This agrees.
  8. Journal entries: Employee benefit expense A/c Dr 7,00,000 to Net defined benefit liability A/c 7,00,000. Net defined benefit liability A/c Dr 5,00,000 to Bank A/c 5,00,000. Net defined benefit liability A/c Dr 50,000 to OCI – Remeasurement of defined benefit plans A/c 50,000.

Answer: P&L charge ₹7,00,000; OCI remeasurement gain ₹50,000; closing net defined benefit liability ₹11,50,000.

Example 2

Kaveri Engineering Ltd has opening DBO of ₹20,00,000, opening plan assets of ₹18,00,000 and a discount rate of 8%. Current service cost for the year is ₹3,00,000. No contributions or benefit payments are made during the year. Closing DBO is ₹26,00,000 and closing plan assets are ₹19,50,000. Find net interest, the P&L charge and the total OCI remeasurement.

Show the solution
  1. Opening net liability = 20,00,000 − 18,00,000 = ₹2,00,000.
  2. Net interest = 2,00,000 × 8% = ₹16,000. Check: interest cost 1,60,000 − interest income 1,44,000 = 16,000.
  3. P&L charge = 3,00,000 + 16,000 = ₹3,16,000.
  4. Expected closing DBO = 20,00,000 + 3,00,000 + 1,60,000 = 24,60,000. Actual closing DBO is 26,00,000, so the actuarial loss = ₹1,40,000.
  5. Expected closing assets = 18,00,000 + 1,44,000 = 19,44,000. Actual closing assets are 19,50,000, so the plan asset remeasurement gain = ₹6,000.
  6. Net OCI remeasurement = loss 1,40,000 − gain 6,000 = ₹1,34,000 loss.
  7. Closing net liability = 26,00,000 − 19,50,000 = 6,50,000. Check: 2,00,000 + 3,16,000 + 1,34,000 = 6,50,000. This agrees.
  8. Journal entries: Employee benefit expense A/c Dr 3,16,000 to Net defined benefit liability A/c 3,16,000. OCI – Remeasurement of defined benefit plans A/c Dr 1,34,000 to Net defined benefit liability A/c 1,34,000.

Answer: Net interest ₹16,000; P&L charge ₹3,16,000; OCI remeasurement loss ₹1,34,000; closing net liability ₹6,50,000.

Exam tips

  • Always draw the two reconciliations (DBO and plan assets) first. Most step marks come from them, even when the final answer is a single figure.
  • State the classification in words: service cost and net interest to profit or loss; remeasurements to OCI, not reclassified. Quote para 120 and para 122 where the question asks for treatment.
  • For settlement or curtailment questions, say that the result is past service cost or a settlement gain or loss in profit or loss, not an actuarial item (para 129).
  • Check your answer by the roll-forward: opening net liability + P&L + OCI loss − contributions = closing net liability.
  • In MCQs, watch for options that put the whole actual return on assets, or actuarial gains, in profit or loss. These are the usual wrong options.

Practice questions from Employee Benefits (Ind AS 19)

Remeasurements, OCI and Journal Entries for Defined Benefit Plans in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Remeasurements, OCI and Journal Entries for Defined Benefit Plans: frequently asked questions

Where are actuarial gains and losses shown under Ind AS 19?

They are shown in other comprehensive income as part of remeasurements of the net defined benefit liability (asset). They are not taken to profit or loss and are not reclassified there later. The entity may transfer them within equity.

How do you calculate net interest on the net defined benefit liability?

Multiply the opening net defined benefit liability (asset) by the discount rate set at the start of the year. Adjust for any contributions and benefit payments made during the year. The result goes to profit or loss.

What is remeasurement on plan assets?

It is the actual return on plan assets minus the interest income on those assets, where interest income is opening fair value times the discount rate. A positive difference is a gain in OCI and a negative difference is a loss in OCI.

How are curtailments and settlements treated?

They are not actuarial gains or losses. The change in the DBO gives past service cost or a gain or loss on settlement, which is recognised in profit or loss. To measure it, remeasure the net liability before and after the event using current assumptions and plan asset values.