QUESTION TWO

Friends Co$.$ operates a defined benefit pension plan for its employees. The

following information relates to the plan for the year ended ${31}^{st}$ December

$2023$:

At $1^{st}$ January $2023,$ the fair value of the pension plan assets was

$8,000,000$ and the present value of the pension plan liabilities was

$8,800,000.$

The actuary estimated that the service cost for the year to ${31}^{st}$ December

$2023$ was $1,300,000.$

The pension plan paid benefits of $400,000$ to retired members and Friends

Co$.$ paid $2,100,000$ in contributions to the pension plan in the year to ${311}^{st}$

December $2023.$

The actuary estimated that the relevant discount rate was $6\%$ on $1^{st}$

January $2023$ and $8\%$ on ${31}^{st}$ December $2023.$

Past service costs amounted to $1,000,000.$

The actual return on plan assets for the year ended ${31}^{st}$ December $2023$

was $750,000.$

During the year to ${31}^{st}$ December $2023,$ Friends Co paid $300,000$ in

settlement of a defined benefit obligation with a present value of $380,000$

On ${31}^{st}$ December $2023,$ the fair value of the pension plan assets was

$10,200,000$ and the present value of the pension plan liabilities was

$9,500,000.$

Required

In accordance with IAS $19$ Employee Benefits:

$($a$)$ Calculate the actuarial gain or loss $($stating which$)$ that will be included in

Friends Co's other comprehensive income for the year ended $31$ st

December $2023$ using the year$-$end proforma prescribed under IAS $19$:

Employee Benefits.

$(10$ marks$)$

$($b$)$ Calculate the total expense that will be charged to Friends Co's statement

of Profit or Loss and Comprehensive Income for the year ended $31$ st

December $2023.$

$(6$ marks$)$

$($c$)$ Indicate the net pension asset or liability $($stating which$)$ that will be

included in Friends Co's Statement of Financial Position as at ${31}^{st}$

December $2023.$

Total for question two, $18$ marks