QUESTION TWO

a$)$ Sona Plc

Sona Plc introduced a pension scheme on $28$ February $2019$ as one of its strategies to promote retention of its employees. However, the scheme became operational on $1$ April $2019$ immediately after Sona Plc had made a contribution of K$900,000.$ Sona Plc has guaranteed pension benefits which employees will get at retirement age. Further, all the employees were eligible including those who were due for retirement in $2019.$

The following information relates to the pension plan for the year to $31$ December $2019$:

$($i$)$ Pension benefits of $K100,000$ were paid on $30$ September $2019.$

$($ii$)$ Fair value of pension assets were K$900,000$ and K$920,000$ on $1$ April $2019$ and $31$ December $2019$ respectively.

$($iii$)$ Present value of pension obligations amounted to K$1,200,000$ on $1$ April $2019$ and K$1,400,000$ on $31$ December $2019.$

$($iv$)$ Current service costs were equal to $K120,000.$

$pv\frac{v}{06}L$

$($v$)$ The yield on high quality corporate bonds at $1$ April $2019$ was $10\%.$

The Directors of Sona Plc need your advice on the accounting treatment of the scheme in their financial statement for the year to $31$ December $2019.$

Required:

To show the profit and loss account extract and statement of Financial Position and comment on the performance of the scheme $(10$ marks$)$

b$)$

Fountain, a public listed company incorporated in Zambia prepares its financial statements using international financial reporting standards $($IFRSs$)$ and International Accounting Standards $($IASs$).$ In $2019$ the company thought of coming up with a pension scheme but really sure on the type. The following information were provided for two schemes as follows: