(a) Distinguish between defined contribution pension plans and defined benefit pension plans. 

(b) An entity’s agreed contributions to a defined contribution plan for 2009 are EUR 700,000. Of this sum, the entity had paid EUR 640,000 by the end of the year. It is becoming clear that the pension fund assets will be insufficient to finance the expected level of employee benefits and that the entity would have to increase its annual contributions by SO per cent if employee expectations are to be met. 

Calculate the expense which should be charged to the entity’s income statement for the year ended 31 December 2009 relating to this plan. Also calculate the amount of the liability which should be reflected in the entity’s balance sheet. 

(c) Explain why accounting for a defined benefit plan is much more difficult than accounting for a defined contribution plan.