An entity on December 31, 20X5, changes its defined benefit pension plan to a defined contribution plan. The entity agrees with the employees to pay them $9 million in total on the introduction of a defined contribution plan. The employees forfeit any pension entitlement for the defined benefit plan. The pension liability recognized in the balance sheet at December 31, 20X4, was $10 million. How should this curtailment be accounted for in the balance sheet at December 31, 20X5?
(a) A settlement gain of $1 million should be shown.
(b) The pension liability should be credited to reserves and a cash payment of $9 million should be shown in expense in the income statement.
(c) The cash payment should go to reserves and the pension liability should be shown as a credit to the income statement.
(d) A credit to reserves should be made of $1 million.