Explain adjustments required to recognise the effects

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Reference no: EM132745542

Question: Retrofit funds a defined benefit pension plan for its employees. The present value of the future benefit obligations and the fair value of plan assets on 30 September 2019 were $100 million and $150 million respectively. High quality corporate bonds yielded 10% at 30 September 2019.

Retrofit contributed $5 million and into the plan during the reporting year to 30 September 2020 and the plan paid pensions of $12 million to former employees during the same period. The rules of the plan were changed on 30 September 2020, improving benefits for plan members and costing the plan $9 million.

The following information is from the actuarial report, as at 30 September 2020:

• The present value of pension plan obligation was $130 million

• The fair value of plan assets was $155 million

• The present cost of pensions earned during the reporting year was $12 million

Required: Calculate and explain the adjustments required to recognise the effects of this plan when preparing a statement of cashflows. Assume that the plan had been accounted for correctly.

Reference no: EM132745542

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