Delta Ltd is a public limited company. During the year the directors of Delta Ltd are considering to form a defined benefit pension scheme for the employees and contributed cash to it of $20 million. However, the key features of the pension scheme have not been determined. The only entry in the financial statements made to date is in respect of the cash contribution which has been included in Delta Ltd.s trade receivables. The directors have been uncertain as how to deal with the pension scheme in the consolidated financial statements because of the significance of the potential increase in the charge to the statement of comprehensive income relating to the pension scheme.

REQUIRED:

Write a report to advise the directors on the differences between defined contribution plan and defined benefit plan. Explain the appropriate accounting treatment to account for the defined benefit scheme including the presentation and measurement of the pension expense. Appropriate quotes from the relevant standard is expected to support your advice.