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ACCA Strategic Professional · Strategic Business Reporting (International) · Employee benefits

Echo plc's defined benefit plan had an opening obligation of $10,000,000 and opening plan assets of $9,000,000. The opening discount rate was 5%. Actual return on plan assets for the year was $620,000. Ignoring contributions and benefits paid, what is the remeasurement gain or loss on plan assets recognised in other comprehensive income?

The remeasurement is a gain of $170,000 in OCI. Interest income on opening assets at the discount rate is $450,000, and the actual return of $620,000 exceeds this by $170,000. Only the excess over the interest income is a remeasurement item.

  1. AGain of $170,000Correct
  2. BLoss of $170,000
  3. CGain of $620,000
  4. DGain of $450,000

Explanation

Interest income on assets included in net interest is $9,000,000 x 5% = $450,000. The remeasurement is the actual return less this amount: $620,000 - $450,000 = $170,000 gain in OCI. Recognising the full $620,000 in OCI ignores the interest income element that goes through profit or loss.

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