Examiners prefer to test defined benefit pension schemes as they are the more complex to account for. So how can you remember the items that need to be reported in the financial statements? Here’s a mnemonic to help.
Pensions Create Important Security In Retirement For Purpose of Enjoying Life
In the statement of comprehensive income the service cost and interest component are reported within profit. The service cost will be reported as an expense and the interest component will be included in finance costs. A remeasurement gain or loss is recognised within OCI.
In the statement of financial position the pension liability will be reported as a non-current liability. The pension liability is the net of the fair value of the fund’s assets and the present value of the obligations. It is the norm that this is a net liability rather than a net asset.
In equity a pension reserve will accumulate the remeasurement gains and losses that have been recognised in OCI.
Comprehensive Income Create Important
Service cost Security
Interest cost In
Remeasurement component Retirement
Financial Position For Purpose of