0000000587235152 - ias 19
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PricewaterhouseCoopers
IAS 19 Employee benefits
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Objectives and scope
Accounting and disclosure of
Short termemployeebenefits
Postemployment
benefits
Other long termemployee benefits
Terminationbenefits
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Short term employee benefits
Definition
Examples
Accounting treatment
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Short termcompensatedabsences
Accumulating
Non-accumulating
Definitions
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Profit sharing and bonus plans
Legal or constructive obligation
Reliable estimate
Within 12 months
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Post employment benefits
Definedcontribution
plans
Definedbenefit
plans
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Defined contribution plans
Expense
whendue Disclosure
Accounting Treatment
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Post retirement benefits-defined benefit plans
Value on balance sheet
FV of scheme assets X
PV of liabilities (X)
Actuarial gains/losses not
yet recognised (X)/X
Past service costs not
yet recognised X
X
Components of change in value accounted for separately
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Determining the value of plan assets
Fair value?
Market price ifavailable No market price?Use estimate
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Benefits earned -
Projected Unit Credit Method
Example
A new employee has current salary of 50,000, expected to increase at a
rate of 4% per annum over the next 5 years. The employee is a member of the
firms defined benefit scheme, and is entitled to a lump sum on retirement(expected to be in 5 years) of 2% of final salary for each year of service. A
discount rate of 5% is applied.
Calculate the obligation at the end of each year
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Calculations
Salary at end of year 5
50,000 x 1.045=60,833
Benefit attributable to each year
60,833 x 2%=1,217
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Calculations (continued)
Benefits attributable to years 1-5
Year 1 2 3 4 5
Benefit attributed to
- Prior years 0 1217 2434 3651 4868
- Current year 1217 1217 1217 1217 1217
Current and prior years 1217 2434 3651 4868 6085
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Calculations (continued)
Year 3 example
Present value of obligationat end of year 3
3,6511.053
= 3,154
Present value of obligationat end of year 2
2,4341.052
= 2,208
946110
836
Movement
Interest cost
Service cost (balance)
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Recognition in the income statement
Current service cost
Interest costExpected return on plan assets
Actuarial gains and losses (to the extent they are
recognised)
Past service costs (to the extent they are recognised)
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Service cost
Current
Due to employeeworking extra
year
Past
Due to changein benefits
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Interest cost
Unwinding of
discount
Expected return
Use long termrate
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Actuarial gains and losses
Experience adjustments
Changes in assumptions
Recognition
10% corridor
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Disclosure for defined benefit schemes
Accounting policy
Description of plan
Reconciliation of assets and liabilities in the balance sheet
Fair value of plan assets
Reconciliation of movement in liabilities
Breakdown of income statement expense
Actual return on plan assets
Actuarial assumptions
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Multi-employer plans
Defined benefit
Defined contribution
Disclosures
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Other long term employee benefits
ExamplesRecognition
and
measurement
Disclosure
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Termination benefits
Obligation to pay
Demonstrably committed
Discounting
disclosure
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