Accounting for Defined Contribution Plan Matching Contributions

Very Hard Employee Compensation Defined Contribution Plans

ABC Corporation has been analyzing its employee benefit structure and is considering its obligations under its defined contribution plan. The plan allows employees to contribute a percentage of their salary, and ABC Corporation matches those contributions up to a specified limit. During the current fiscal year, one of ABC's employees contributed $5,000, and the company matched $3,000 of that contribution.

For the purpose of financial reporting, ABC Corporation follows the guidelines of IFRS and is required to account for these contributions correctly. Where should ABC Corporation report its employer matching contributions in the financial statements?

As an increase in employee expense on the income statement and as a liability in the balance sheet until paid.

As part of total revenues on the income statement and as an asset on the balance sheet.

As a reduction of employee expenses on the income statement and not reflected on the balance sheet.

Hint

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% Correct64%