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A business enterprise has an underfunded defined benefit pension plan. As a result, what amount should...

A business enterprise has an underfunded defined benefit pension plan. As a result, what amount should it report in its balance sheet? Which section of the authoritative literature best defines the amount to be reported in the balance sheet?

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Answer #1

The business enterprise has an underfunded defined benefit pension plan that means present value of defined obligation is more than the plan assets of the enterprise.

Excess of defined benefit obligation over plan assets should be reported in the balance sheet.

IAS 19 "Employee benefits" prescribes that the underfunded defined obligation to be shown on liability side of the balance sheet. This can be shown as under the sub-heading "Provision for employee benefits".

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