Problem
Universal Solutions operates a defined benefit pension scheme on behalf of its employees. The company conducts an annual review of funding in conjunction with their actuaries who have supplied the following information: At 31 Dec Year 3 At 31 Dec Year 4 Present value of pension fund obligation $1,000 $1,200 Market value of pension fund assets $1,000 $1,150 Information relevant to the actuarial valuation: Expected return on plan assets 8% Discount rate used to determine pension fund liabilities 12% Current service cost $100 Contribution to the pension fund $140 Benefits paid out amounted to $95
Task
1. Calculate the charge to profit or loss for the year to 31 December Year 4.
2. Compute the amount of the pension surplus or deficit in the statement of financial position as at 31 December Year 4.
3. Compute any actuarial gain or loss as at 31 December Year 4 and explain the available accounting treatments of such a gain or loss.