FRS 17 – Defined benefit schemes

Postings

The final phase of FRS 17 requires postings to be made such that the pension assets, liabilities and costs are included in the balance sheet and profit and loss account.

To facilitate this some new account codes have been introduced as follows:

Other financial income
Expected return on assets	438
Interest on pension scheme liabilities	439

Pension scheme surplus/deficit
Surplus brought forward	958/1
Movements:
Current service costs	958/2
Contributions	958/3
Past service costs	958/4
Other finance income	958/5
Actuarial gain	958/6
Previously unrecognised surplus from past service costs	958/7
Gains and losses on settlement/curtailment	958/8
Previously unrecognised surplus from settlement/curtailment	958/9

Deferred tax liability	959

The journals required in Accounts Production to produce the example in FRS 17 could be as follows:

			Current		Comparative
		Account	Dr	Cr	Dr	Cr
1.	Set up b/f in comparative year
Dr	Surplus b/f	958/1			92
Cr	Def tax liability	959				28
Cr	profit and loss reserve b/f	968/1				64
This will set up the opening position for the comparative year. This journal is only required in the first year of full FRS 17 adoption.

			Current		Comparative
		Account	Dr	Cr	Dr	Cr
2.	Create prior year adjustment
Dr	Surplus b/f	958/1	204
Cr	Def tax liability	959		61
Cr	profit and loss reserve	475		143
This will set up the opening position in the current year. This journal is only required in the first year of full FRS 17 adoption.

			Current		Comparative
		Account	Dr	Cr	Dr	Cr
3.	Pension contribution posting
Dr	Pension surplus movement - contribution	958/3	25		35
Cr	Bank	692		25		35
This is the contribution due for payment by the company for the year. In some circumstances this may include an accrual or prepayment where under or overpayments have been made.

			Current		Comparative
		Account	Dr	Cr	Dr	Cr
4.	Operating profit charges
Dr	Pension costs	46	46		25
Cr	Pension surplus movement - current service costs	958/2		34		25
Cr	Pension surplus movement - past service costs	958/4		12
This is the charge that will go through the profit and loss account calculated by the actuary as a result of employee services and other changes in the current year.

			Current		Comparative
		Account	Dr	Cr	Dr	Cr
5.	Other financial income
Dr	Interest on pension scheme liabilities	439	53		57
Cr	Expected return on assets	438		73		68
Dr	Pension surplus movement - other financial income	958/5	20		11
These amounts are also calculated by the actuary and are charged to the profit and loss account under the heading of Other financial income.

			Current		Comparative
		Account	Dr	Cr	Dr	Cr
6.	Actuarial gain
Dr	Pension surplus movement - actuarial gain	958/6	276		91
Cr	Profit and loss reserve	968/8		276		91
This is the actuarial gain which is recognised in the STRGL.

			Current		Comparative
		Account	Dr	Cr	Dr	Cr
7.	Deferred taxation
Dr	Def tax charge	451	83		33
Cr	Def tax liability	959		83		33
Deferred tax may be split – some being charged to the profit and loss account and some being recognised in the STRGL.

The above can be used as a guide for working out the postings required for an individual client.

In many cases the pension contributions will already have been posted. If this is the case then the most likely journal to have been made will be:

			Current		Comparative
		Account	Dr	Cr	Dr	Cr
	Pension contribution posting
Dr	Pension costs	46	25		35
Cr	Bank	692		25		35

If this is the case then replace journal 3 above with the following journal:

			Current		Comparative
		Account	Dr	Cr	Dr	Cr
	Pension contribution posting
Dr	Pension surplus movement - contribution	958/3	25		35
Cr	Pension costs	46		25		35

Data screens

There are a number of data screens that will require completion.

Details for the Pension commitments note

The screens for this note can be found within:

Notes to Financial Statements | Other Disclosures | Pension Costs | Defined Benefit Schemes | FRS 17 Disclosures

Items to appear within the STRGL

The actuarial gain needs to be entered into the following data screen to show within the STRGL.

Recognised gains and losses | Statement of recognised gains etc

Prior year adjustment note (first year adoption)

Notes to the financial statements | Prior year adjustments

Accounting policy

Please consider the wording of the accounting policy and adjust if necessary

Notes to the financial statement | Accounting policies | Alternative accounting policies | Pensions