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