A company offers a defined benefit and end-of-service benefit scheme. Here we show the basics of recording the financial life of this scheme. In-depth specifics can get intricate and confusing.

Financial circumstances and movements for 2019

  • At the outset of 2019 the fair value of the assets and liabilities amounted to $8 million
  • During 2019 the benefit expense was $ 10 million and,
  • the company contributed $ 6 million to the benefit scheme
  • At the end of 2019, the fair value of the assets and liabilities is $ 13 million.

Transactions for 2019

We record the benefit expense as follows:

  • DR Benefit Expense 10
  • CR Defined Benefit Liability 10

To record company contribution to Benefit Liability:

  • DR Defined Benefit Liability 6
  • CR Cash 6

To adjust Benefit Liability to fair value as at the end of the FY or valuation period:

  • DR Other Comprehensive Income (“OCI”) 1
  • CR (Net) Defined Benefit Liability 1