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1. Postemployment benefits can be either defined contribution plans or defined benefit plans. Defined contribution plans have definite contributions but indefinite benefits, while defined benefit plans have definite benefits but indefinite contributions.
2. Defined benefit plans use actuarial assumptions to calculate the defined benefit cost, which includes the current and past service costs, net interest, and remeasurements such as actuarial gains and losses.
3. PAS 19R provides the accounting requirements for postemployment benefit plans and defines the projected benefit obligation as the measure for the defined benefit liability.
Deskripsi Asli:
Accounting for postemmployment benefits summary
Judul Asli
Accounting for Postemployment Benefits Summary (1)
1. Postemployment benefits can be either defined contribution plans or defined benefit plans. Defined contribution plans have definite contributions but indefinite benefits, while defined benefit plans have definite benefits but indefinite contributions.
2. Defined benefit plans use actuarial assumptions to calculate the defined benefit cost, which includes the current and past service costs, net interest, and remeasurements such as actuarial gains and losses.
3. PAS 19R provides the accounting requirements for postemployment benefit plans and defines the projected benefit obligation as the measure for the defined benefit liability.
1. Postemployment benefits can be either defined contribution plans or defined benefit plans. Defined contribution plans have definite contributions but indefinite benefits, while defined benefit plans have definite benefits but indefinite contributions.
2. Defined benefit plans use actuarial assumptions to calculate the defined benefit cost, which includes the current and past service costs, net interest, and remeasurements such as actuarial gains and losses.
3. PAS 19R provides the accounting requirements for postemployment benefit plans and defines the projected benefit obligation as the measure for the defined benefit liability.
- "Contribution is definite but benefit is indefinite" a. contribution - expense in the period incurred Employee benefit expense xx Cash xx b. unpaid contribution - accrued Employee benefit expense xx Accrued benefit payable xx c. excess contribution - prepaid Prepaid benefit expense xx 2. Defined benefit plan Cash xx - "The benefit is definite but the contribution is indefinite" - uses actuarial assumptions - obligation is discounted: - Defined benefit cost is computed as follows: a. Service cost Current service cost xx Past service cost xx Gain or loss on settlement xx xx b. Net interest Interest expense (IE) on defined benefit liability Employee benefit (PBO - beg x discount rate) xx expense Interest income (II) on plan assets ( to be presented (FVPA - beg x discount rate) (xx) as part of Profit or Interest expense on the effect of asset ceiling Loss) (Effect of asset ceiling - beg x discount rate) xx xx c. Remeasurements Actuarial (gain) and loss xx Remeasurement Actual return on plan assets less interest Gain or Loss income on plan assets xx (presented as part Any change in the asset ceiling less interest of Other Compre- expense on the effect of asset ceiling - beg xx xx hensive income) Defined benefit cost xx Note 1 Settlement price xx - deducted from FVPA PV of benefit obligation settled (xx) - deducted from PBO (Gain) or loss on settlement xx - part of Employee benefit expense Note 2 PBO - actual xx Actuarial gain - decrease in PBO PBO - estimated (xx) Actuarial loss - increase in PBO Actuarial (gain) and loss xx Note 3 Computation of Defined benefit obligation - use of projected unit credit method - 2 applications: 1. Projected benefit obligation (PBO) - base on future compensation level 2. Accumulated benefit obligation (ABO) - base on current compensation level - PAS 19R implicitly states that the defined benefit obligation is the PBO PAS 19R Accounting for Employee Benefits (Postemployment Benefits) Note 4 Computation of ABO/PBO Annual benefit (agreed % of salary x no. of years worked) xx x PV factor of ordinary annuity of 1 for expected life expectancy of covered employees xx Present value on the date of retirement xx x PV factor of 1 for the remaining required years of service before retirement xx ABO/PBO xx Note 5 Prepaid/Accrued benefit cost (P/ABC) Fair value of plan assets (FVPA) xx Projected benefit obligation (PBO) (xx) Prepaid/Accrued benefit cost (P/ABC) xx If FVPA < PBO = Accrued benefit cost FVPA > PBO = Prepaid benefit cost - According to PAS 19R, if FVPA >PBO, there is a SURPLUS that should not exceed with the asset ceiling - FVPA and PBO will be in memorandum records only and will not appear in the financial statements - P/ABC will be presented as noncurrent asset/liability Note 5 Effect of asset ceiling (considered if there is SURPLUS),amounts are assumed FVPA - beg xx 4,500,000 PBO - beg xx (4,000,000) P/ABC -beg xx 500,000 Asset ceiling xx 300,000 Effect of asset ceiling - beg xx 200,000 FVPA - end xx 6,000,000 PBO - end xx (4,800,000) P/ABC -end xx 1,200,000 Asset ceiling xx 800,000 Effect of asset ceiling - end xx 400,000 Effect of asset ceiling - end xx 400,000 Effect of asset ceiling - beg xx 200,000 Change in the effect of asset ceiling xx 200,000 IE on the effect of asset ceiling - beg (xx) (20,000) Remeasurement loss or (gain) xx 180,000 assuming discount rate is 10% Remeasurement loss if there is increase in the effect of asset ceiling Remeasurement gain if ther is decrease in the effect of asset ceiling *asset ceiling is the maximum amount of SURPLUS that can be recognized in the financial statement as P/ABC Note 6 Journal entry Employee benefit expense xx P/ABC (balancing figure, may be debit or credit) xx Cash (equal to contribution) xx Remeasurement gain - OCI xx (debit to remeasurement loss - OCI if loss) Reconciliation: P/ABC - beg xx Debit or credit adjustment (based on the entry above) xx P/ABC - end xx Note 7 Transitional provision PAS 19R shall be applied restrospectively, meaning accounted for as adjustment of the beginning balance of retained earnings Journal entry Retained earnings xx P/ABC xx reverse all the debit components used in the computation of P/ABC under the old standard Example Fair value of plan assets 4,000,000 Unamortized past service cost 400,000 Unrecognized actuarial loss 500,000 Projected benefit obligation (6,000,000) Prepaid/Accrued benefit cost (1,100,000) Retained earnings 1/1 900,000 P/ABC 900,000 Note 8 Worksheet approach EBE PBO FVPA Cash (RG)/RL Beginning balances xx xx Current service cost xx xx Interest expense xx xx Actual return xx xx Interest income (xx) (xx) Remeasurement gain or (loss) xx xx(xx) Contribution xx (xx) Benefits paid (xx) (xx) Settlement price xx (xx) PV of defined benefit obligation (xx) (xx) (Gain) or loss on settlement xx xx(xx) Actuarial gain or loss xx(xx) xx(xx) Change in the effect of asset ceiling xx IE on the effect of asset ceiling - beg (xx) xx Remeasurement gain or loss xx xx(xx) Total / Ending balances xx xx xx xx xx EBE - Employee benefit expense RG/RL - Remeasurement gain/ remeasurement loss