Reference no: EM133096577

Question - You are the controller of Tsimtsum Ltd. (TL), and you're working on the year-end financial reporting for TL's generous defined benefit pension plan. You have gathered the following information for 2016:

From TL's records:

-Contributions withheld from employees and submitted to the trustee amounted to $310,000

-$525,000 was contributed directly by TL

-The discount rate assumption TL directed the actuary to use was 7% per annum

From the trustee's year end statements:

-The fair value of plan assets at January 1 and December 31, 2016 were $14,625,000 and 15,800,000 respectively.

-The actual return on plan assets was $668,000.

-Benefits totaling $328,000 were paid out to retirees during 2016.

From the actuary's report:

-The projected benefit obligation increased from $18,080,000 at January 1, 2016 to $19,933,600 at December 31, 2016.

-Service costs for 2016 amounted to $588,000.

-There were no actuarial gains or losses during the year.

Required -

1. Assume TL reports under ASPE. What amount would be reported as pension expense in the 2016 financial statements?

2. Assume instead that TL reports under IFRS. What pension-related line items and amounts will be shown on the company's comprehensive income statement for the year ended December 31, 2016?

3. What balance will be shown on the December 31, 2016 balance sheet related to the pension plan? Is the plan in a deficit or surplus position?

4. Most pension plans in Canada are in a deficit position because of the difference between the accrued benefit obligation calculated for funding purposes, and the accrued benefit obligation calculated for accounting purposes. Explain why these amounts differ, and why they result in pension plan deficits.