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2.1 Evaluate the IAS 20 accounting treatment of government grants relating to assets against the Conceptual Framework. (0.5 Mark) 2.2 Khaleej BSC is a diversified
2.1 Evaluate the IAS 20 accounting treatment of government grants relating to assets against the Conceptual Framework. (0.5 Mark) 2.2 Khaleej BSC is a diversified unlisted public limited company which is planning to become listed on the Bahrain Bourse within two years. Khaleej BSC operates a defined benefit pension scheme. The directors of Khaleej BSC have proposed a change of accounting policy in relation to the defined benefit scheme; the exhibit explains the directors' plans to change the accounting policy in respect of the company's pension costs. Exhibit: Change of accounting policy in relation to the defined benefit scheme Khaleej BSC operates a defined benefit pension scheme. During the year Khaleej BSC enhanced the benefits payable to current and future pensioners as a result of pressure from within the industry. The increase in the pension obligation and the associated past service cost is significant. The finance director believes that, as this cost relates to services performed in prior years, it would be misleading to include it in profit or loss for the year. She therefore proposes to change the accounting policy of Khaleej BSC to recognise the past service cost in other comprehensive income. She believes that this change can be justified on the grounds of fair presentation. Required Discuss the ethical and accounting implications of the finance director's proposed accounting policy in respect of the defined benefit pension scheme. (1.0 Marks)
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