Ias 19 employee benefits

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Reference no: EM133206065

Subject: ACCA SBR

Topic: IAS 19 Employee Benefits

On 1 July 20x3 MKL started a defined benefit pension scheme for its employees and immediately contributed $4m cash into the scheme. The actuary has stated that the net obligation was 50.4m as at 30 June 20x4. The interest rate for good quality corporate bonds was 10% at 1 July 20x3 but 12% by 30 June 20x4. The actual return on the plan asset was 11%. The increased cost from the employee's service in the year was $4.2m which can be assumed to accrue at the year end.

On 30 June 20x4 MKL paid $0.3m in settlement of a defined benefit obligation with a present value of 50.2m. This related to staff that were to be made redundant although, as at 30 June 20x4, they still had an average remaining employment term of one month. The redundancies were not foreseen at the start of the year.

Required

Discuss the correct accounting treatment of the above transaction in the financial statements of MKL for the year ended 30 June 20x4.

Reference no: EM133206065

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