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    IAS 19 Employee Benefits

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    Pui Fun Leo
    Penn has a defined benefit pension plan. The opening plan assets were $3.6 million and plan liabilities were $4.3 million. During the year, the plan received $550,000 in contributions and paid $330,000 in benefits. The expected return on assets was 8%. An additional $58,000 in liabilities were recognized for staff redundancies. The actuary valued year-end plan assets at $4.215 million and liabilities at $4.64 million, resulting in a defined benefit liability of $425,000.

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    IAS 19 Employee Benefits

    Uploaded by

    Pui Fun Leo
    70 views3 pages
    Penn has a defined benefit pension plan. The opening plan assets were $3.6 million and plan liabilities were $4.3 million. During the year, the plan received $550,000 in contributions and paid $330,000 in benefits. The expected return on assets was 8%. An additional $58,000 in liabilities were recognized for staff redundancies. The actuary valued year-end plan assets at $4.215 million and liabilities at $4.64 million, resulting in a defined benefit liability of $425,000.

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    Penn has a defined benefit pension plan. The opening plan assets were $3.6 million and plan liabilities were $4.3 million. During the year, the plan received $550,000 in contributions and paid $330,000 in benefits. The expected return on assets was 8%. An additional $58,000 in liabilities were recognized for staff redundancies. The actuary valued year-end plan assets at $4.215 million and liabilities at $4.64 million, resulting in a defined benefit liability of $425,000.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    70 views3 pages

    IAS 19 Employee Benefits

    Uploaded by

    Pui Fun Leo
    Penn has a defined benefit pension plan. The opening plan assets were $3.6 million and plan liabilities were $4.3 million. During the year, the plan received $550,000 in contributions and paid $330,000 in benefits. The expected return on assets was 8%. An additional $58,000 in liabilities were recognized for staff redundancies. The actuary valued year-end plan assets at $4.215 million and liabilities at $4.64 million, resulting in a defined benefit liability of $425,000.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    Fund (asset) Obligation (liability) P&L

    Opening balance 60 64 Current service cost (17)


    Service cost (9+8) 17 Interest (3)
    Contruburions 5 Return 3
    Benefits paid out (6) (6)
    return on asset (5% X60 ) 3
    Cost of liabilities (5% X 64) 3 OCI
    Measurement gain 7
    Expected balance 62 78
    (B) 4 (3) SOFP
    Actual balance 66 75 (9) Pension asset 66
    Pension liability (75)
    (9)
    Reconciliation
    B/f liability -4
    SPL (non-cash expenses) -17 * service cost is non-cash expenses, so need to add back to the profit
    OCI 7.2 * Interest/ return is as finace cost or interest income
    Cash -> paid in 5 *company paid, it is a cash outflow in cash flow statement
    3 Defined benefit plan
    Brutues operated a defined benefit pension plan for its employees. The present value of the future
    benefit obligations and the fair value of its plan assets on 1 January 20X1 were $110 million and
    $150 million respectively.

    The pension plan received contributions of $7 million and paid pensions to former employees of
    $10 million during the year.

    Extracts from the most recent actuarial report shows the following:

    Present value of pension plan obligation at 31 December 20X1 116m


    Fair value of plan assets at 31 December 20X1 140m
    Present cost of pensions earned in the period 11m
    Yield on high quality corporate bonds at 1 January 20X1 10%

    On 1 January 20X1, the rules of the pension plan were changed to improve benefits for plan
    members. The acruary has advised that this will cost $10 million.

    Required extracts from the notes to Brutus' financial statements for the year ended 31 December 20X1 which
    show how the pension plan should be accounted for. (10marks)
    Note: Assume contributions and benefits were paid on 31 December.

    Fund (asset) Obligation (liability) P&L


    Opening balance 150 110 Current service cost (11)
    Contribution 7 Past service cost (10)
    Benefits paid (10) (10) cost of liability (12)
    Current service cost 11 Return on asset 15
    Past service cost 10
    Return on asset 150 X 10% 15 OCI
    Cost of liability (110+10) X 10% 12 measurement loss (5)

    Expected balance 162 133 SOFP


    Gain/ loss (balance) (22) (17) Pension asset 140
    Actual balance 140 116 24 Pension liability 116
    24
    4 Sundry Statement
    Penn has a defined benefit pension plan.
    Required
    Using the information below, prepare extracts from the statement of financial position
    and the statement of profit or loss and other comprehensive income for the year ended
    31 January 20X8. Ignore tacxation

    (i) The opening plan assets were $3.6 million on 1 February 20x7 and plan liabilities at
    this date were $4.3 million.

    ii) Company contributions to the plan during the year amounted to $550,000. The
    contrubutions were paid at the start of the yeat

    iii) Pensions paid to former employees amounted to $330,000. These were paid at the
    start of the year

    iv) The yield on high quality corporate bonds was 8% at 1 Februart 20X7

    v) On 31 January 20X8, five staffs were made redundant, and an extea $58,000 in total
    was added to the value of their pensions.

    vi) Current service costs as provided by the actuary are $275,000

    vii) At 31 January 20X8, the actuary valued the plan liabilities at $4.64 million and the
    plan assets at $4.215 million.

    Fund (asset) Obligation (liability)


    Opening balance 3600 4300
    Contribution 550
    Benefit paid -330 -330
    Return on asset (3600+550-330) X 8% 305.6 *The reason why we need to plus contribution & less benefit
    Cost of liabilities (4300-330) X 8% 317.6 paid is because they were paid at the start of the year
    Current service cost 275
    Amendment 58 *represent company has extra liability for staff redundant pension

    Expected balance 4125.6 4620.6


    Balance 89.3999999999996 19.3999999999996
    Actual balance 4215 4640

    P&L
    Current service cost -275
    Return on asset 305.6
    Cost of liabilities -317.6

    OCI
    Measurement gain 70

    SOFP
    Pension asset 4215
    Pension liability 4640
    -425

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