Question

The actuarial valuation report of Entity A's post employment benefit plan shows the following information:

Service cost 300,000
Net interest on the net defined benefit liability (asset) 90,000
Remeasurements of the net defined benefit liability (20,000)
Total defined benefit cost 370,000
How much will be shown in profit or loss and in other comprehensive income?
Profit or loss Other comprehensive income a. 370,000 0
b. 300,000 70,000
c. 390,000 (20,000)
d. 0 370,000

Answer 1

The actuarial valuation report of Entity A's post employment benefit plan shows that $390,000 will be shown in profit or loss and ($20,000) will be shown in other comprehensive income.

Step-by-step explanation:

The actuarial valuation report of Entity A's post employment benefit plan shows that the total defined benefit cost is $370,000. This cost consists of three components: service cost, net interest on the net defined benefit liability (asset), and remeasurements of the net defined benefit liability. The service cost is $300,000, the net interest on the net defined benefit liability (asset) is $90,000, and the remeasurements of the net defined benefit liability is ($20,000).

To determine how much will be shown in profit or loss and in other comprehensive income, you need to understand that the service cost and the net interest on the net defined benefit liability (asset) are recognized in profit or loss. Therefore, the amount shown in profit or loss will be $300,000 + $90,000 = $390,000. On the other hand, remeasurements of the net defined benefit liability are not recognized in profit or loss but in other comprehensive income. So, the amount shown in other comprehensive income will be ($20,000).

Therefore, the correct answer is option c. 390,000 (20,000), with $390,000 shown in profit or loss and ($20,000) shown in other comprehensive income.