3. TODAYSAGENDA PROFESSION AL JUDGEMENT/ MANAGEMEN T ESTIMATES
FUNDAMENTA L CONCEPT INVENTORI ES BIOLOGICAL ASSETS POST-EMPLOYMENT
BENEFITS DISCLOSURES AND IFRIC 14 SHORT TERM, TERMINATION, OTHER
LONG TERM BENEFITS 3
4. IAS 2 INVENTORIES 4
5. INVENTORIES IAS 2 Are assets that are either: Held for sale
In the process of production for sale Materials/supplies to be
consumed in production or rendering services 5
6. MEASUREMENT Measured at lower of cost and net realizable
value (NRV) Costs include: Costs of purchase Costs of conversion
Other costs 6
7. COSTS OF PURCHASE Include purchase price, import duties and
other taxes Trade discounts, rebates and similar items are deducted
7
8. COSTS OF CONVERSION Includes costs directly related to
production Fixed and variable production overheads required to
convert materials into finished goods Fixed is allocated on normal
capacity Variable is based on actual use OTHER COSTS Incurred to
bring inventories to their present location and condition 8
10. COST OF INVENTORIES OF A SERVICE PROVIDER Measured at cost
of production Includes labour and other costs of direct personnel
Sales and general administrative personnel are expensed in the
period 10
11. WOLF CHALLENGE# 1 Dunder Mifflin Inc. (DM) produces
inventory, with a selling price of $500. The materials bought to
produce the inventory cost $300 and $200 was spent in direct labour
for it. Additionally, the depreciation on the production plant was
$150. The inventory production used 20% of the plant. There is a
rebate of $35. What is the value of the inventory? 11
12. TECHNIQUES FOR MEASUREMENT OF COST OF INVENTORIES 1.
Standard cost method cost takes into account normal levels of
materials and supplies, labour, efficiency and capacity utilization
2. Retail method Used in the retail industry for rapidly changing
items with similar margins Based on the known relationship between
cost and retail prices of inventory 12
13. COST FORMULAS Specific ID is used for items not ordinarily
interchangeable or used for specific projects All other inventories
use one of the following: First-in, first-out (FIFO) Weighted
average Must use same formula for items of similar nature and use
13
14. COST FORMULAS ILLUSTRATIVE EXAMPLE DATE DESCRIPTIO N UNITS
UNIT COST TOTAL COST March 1 Beginning inventory 200 $10 $2,000
March 14 Inventory purchased 300 $12 $3,600 March 17 Inventory
purchased 100 $15 $1,500 Total 600 $7,100 The beginning balance,
purchase and sales of inventory of Dunder Mifflin are shown below.
150 units were sold in March 14
15. COST FORMULAS ILLUSTRATIVE EXAMPLE FIFO WEIGHTED AVERAGE
Per unit cost $7,100/600units =$11.83 COGS = 150*$10 COGS
=$11.83*150 =$1,500 =$1,775 Ending Inventory =(50*$10) + (300*$12)
+ (100*$15) Ending Inventory =$11.83*450 = $5,600 =$5,324 15
16. COST FORMULAS Same cost formula must be used for
inventories that are similar If the NRV is lower than cost,
inventories will be written down Reassessed every subsequent period
for potential reversal 16
17. RECOGNITION AS AN EXPENSE The carrying amount of the
inventory will be recognized as an expense in the period the
related revenue is recognized 17
18. DISCLOSURE Disclosure of the following: Accounting policies
used Cost formulas Carrying amounts Inventories recognized as an
expense Write-downs and reversals ASPE 3031 vs. IAS ASPE requires
less detailed disclosures when compared to IAS 2 18
19. IAS 41 - AGRICULTURE 19
20. AGRICULTURE IAS 41 Applied to the following when related to
agricultural activity Biological assets (BA) Agricultural produce
at the point of harvest Government grants 20
21. AGRICULTURAL ACTIVITY Agricultural activity has three
common features 1. Capability to change 2. Management of change 3.
Measurement of change BIOLOGICAL ASSET AGRICULTURAL PRODUCE
PRODUCTS RESULTING Sheep Wool Yarn, carpet Bushes Leaf Tea Vines
Grapes Wine 21
22. RECOGNITION AND MEASUREMENT Three conditions required for
recognition: 1. Entity controls the asset from past events 2.
Economic benefits to the entity are probable 3. The FV of the asset
can be measured reliably BAs and agricultural produce are measured
on initial recognition at FV less costs to sell BA can be measured
at cost if FV is not available Agricultural produce is always
measured at FV 22
23. RECOGNITION AND MEASUREMENT In certain situations, costs
can approximate FV is little biological transformation has taken
place or is not material BAs in a package Gains and losses in
P&L 23
24. GOVERNMENT GRANTS Unconditional government grant related to
BA Recognized in P&L at FV less costs to sell when it is
receivable Conditional grants are recognized once all conditions
are met 24
25. DISCLOSURE General Gains/losses Description Changes in CA
Changes in FV Description of BA Why measure is not reliable Useful
life and depreciation Gains/losses If FV becomes available Nature
of grant Unfulfilled conditions Any major decrease expected
Government Grants When FV not reliable 25
26. IAS 19- EMPLOYEE FUTURE BENEFITS CONCEPTUAL FRAMEWORK
POST-EMPLOYMENT BENEFITS SHORT AND OTHER LONG TER & TERMINATION
BENEFITS Defined Benefit Defined Contribution DISCLOSURES 26
27. CONCEPTUAL FRAMEWORK LIABILITY EXPENSE Present obligation
Arising from past events Expected future outflow of economic
benefits Decrease in economic benefits or incurrence of liability
Allocated to the income statement systematically and rationally
EMPLOYEE EMPLOYER RENDER SERVICES PROVIDE BENEFITS MATCHING
PRINCIPLE 27
28. DEFINED BENEFIT V/S DEFINED CONTRIBUTION Economic substance
of determines its classification as defined benefit or defined
contribution DEFINED CONTRIBUTION PLAN DEFINED BENEFIT PLAN Is the
entitys legal or constructive obligation limited to the amount that
it agrees to contribute to the fund? Are the investment and
actuarial risk borne by the employee? Is the entitys obligation to
provide the agreed benefits to current and former employees? Are
the investment and actuarial risk borne by the employer? 28
29. DEFINED CONTRIBUTION PLANS IFRS (IAS 19) ASPE 3462 An
entitys obligation for each period is determined by amounts to be
contributed based on the plan No actuarial valuations are necessary
to measure the liability or cost Obligations are measured on an
undiscounted basis, except over 12 months There is no possibility
of an actuarial gain or loss per above treatment Contributions due
for a period after retirement are discounted, and actuarial
gains/losses may occur WHY IS IFRS SILENT ON THIS MATTER? 29
30. DEFINED CONTRIBUTION PLANS IFRS (IAS 19) ASPE 3462
Recognize: Liability: for any amounts after deducting contributions
paid. Excess contributions are recognized as an asset (i.e. Prepaid
pension expense) Recognize a cost for a period comprising: Current
Service cost Past Service cost Interest cost Reduction in interest
income on unallocated plan surplus Amounts are expensed unless
required to be capitalized under another Standard (i.e. IAS 16 PPE)
Amounts are expensed or capitalized if required by another Standard
(i.e. ASPE 3061 PPE) IFRS IS MORE VAGUE IN THIS MATTER 30
31. DEFINED CONTRIBUTION PLANS ILLUSTRATIVE EXAMPLE
CONTRIBUTION JOURNAL ENTRIES Contributions not made: DR. Pension
Expense XX CR. Contributions Payable XX Over-contributed: DR.
Pension Asset X DR. Pension Expense XX CR. Cash XXX 31
32. WOLF CHALLENGE# 2Dunder Mifflin Inc. has a post-employment
plan to which it is required to contribute a fixed amount of 5% of
gross salaries to the fund, regardless of its performance. The
monthly salaries were $75,000 in February 2014. Amounts are paid to
the fund quarterly and the company has a December 31 year-end.
Select the appropriate journal entry for February: a) DC Plan; Dr.
Pension Expense $3,750 Cr. Accrued Pension Liab $3,750 b) DB Plan;
Dr. Pension Expense $3,750 Cr. Accrued Pension Liab $3,750 c) DC
Plan; Dr. Pension Expense $3,750 Cr. Cash $3,750 d) DB Plan; Dr.
Pension Expense $3,750 Cr. Cash $3,750 32
33. DEFINED BENEFIT PLANS 33
34. FUNDING REQUIREMENTS DBPs are funded by an entity and
sometimes its employees, into a fund that is legally separate from
the reporting entity. The payment of funded benefits depends on the
financial position and investment performance, and the entitys
ability and willingness to fund any shortfalls in the funds assets.
(IAS 19.56) THE EXPENSE RECOGNIZED MAY NOT EQUAL THE PERIODS
CONTRIBUTION PAID 34
35. ACCOUNTING FOR DBP 1. Determine the deficit or surplus 2.
Determine amounts to include in profit and loss 3. Determine
remeasurements in Other Comprehensive Income 4. Determine net
defined benefit liability (asset) 35
36. 1. DETERMINE DEFICIT OR SURPLUS Use the projected unit
credit method to make a reliable estimate of the ultimate cost to
the entity of the benefit that employees have earned in the current
and prior periods Discount the benefit to determine the present
value (PV) of the defined benefit obligation (DBO) and service
costs Deduct the fair value of plan assets from the PV of DBO
36
37. PROJECTED UNIT CREDIT METHOD Under this method each period
gives rise to an additional amount of benefit to the employee.
Straight line or Benefit/years of service approach Total benefit of
$XXX Number of attribution years of service 37
38. OTHER INPUTS Discount rate: 1. Market yields on high
quality corporate bonds 2. If unavailable, use yield on government
bonds Attribution years: Attributed on a straight line basis from
a) date when service leads to benefits to b) date when service does
not lead to material benefits Actuarial assumptions: Mortality rate
Employee turnover Claim rates Financial assumptions (i.e. discount
rates) 38
39. ILLUSTRATIVE EXAMPLE REFER TO ILLUSTRATIVE EXAMPLE 2 IN
HANDOUT 1. Estimate Final Salary: 10,000 x (1.07) 4 = CU 13,108 2.
Compute yearly benefit: 13,108 x 1% = CU 131 3. PV of Year 1
obligation: PV of 131 at 10% for 4 years = CU 89 (apply for other
years) 4. Year 2 interest: Opening Balance of 89 x 10% = CU 9
(apply for following years) Year 1 2 3 4 5 Benefit attributed to:
Prior years 0 131 262 393 524 Current year (1% of final salary) 131
131 131 131 131 Current and prior years 131 262 393 524 655 Opening
obligation 89 196 324 476 Interest at 10% 9 20 33 48 Current
service cost 89 98 108 119 131 Closing obligation 89 196 324 476
65539
40. WOLF CHALLENGE# 3A lump sum benefit is payable on
retirement equal to 2% of the final salary. The plan pays the
benefit only for each year of service excluding service before the
age of 60 until retirement at age 65. The benefits vest
immediately. Charlie joined Dunder Mifflin when he was 55 years old
and his salary at age of 60 today is $100,000, expected to grow at
5% per year for 4 years. The market yield on junk corporate bonds
are 12% and A+ bonds are 10%. 1. What is the attribution period for
Charlie (Ages ___ to ___) 2. What is the discount rate? 3.
Calculate the current service cost and obligation assuming the
benefits attribute from ages 60 to 65. 40
41. 2. DETERMINE AMOUNTS IN P&L Current Service costs Past
Service costs and curtailments Gain/loss on settlement Net interest
on the net defined liability (asset) = Pension expense reported in
Profit & Loss *Past service cost and gain/loss on settlement
recognized at earlier of: 1) plan amendment and 2) when entity
recognizes restructuring costs under IAS 37 41
42. ILLUSTRATIVE EXAMPLE Continuing illustrative example 2,
assume that in Year 4, the entity changed its pension plan from 1%
of final salary to 2%. Assuming no changes to actuarial assumptions
on the final salary of $13,108, compute the past service cost. 1.
Compute revised current service cost: 13,108 x 2% = CU 262 for year
4 and 5 2. Calculate past service costs as difference between
amended and original DBO: 786 (262x3) - 393 (131x3) = 393 for the
first 3 years 3. PV past service costs: PV of 393 at 10% for 1 year
(Year 4-5)= CU 357 4. PV current service costs: PV of 262 at 10%
for 1 year (Year 4-5) = CU 238 5. Expense the current and past
service cost: CU 238 AND CU 357 BEFORE AMENDMENT 393 (131x3) POST
AMENDMENT 786 (262x3) PAST SERVICE COST 393 PV of PAST SERVICE 357
42
43. 3. REMEASUREMENTS IN OCI Actuarial gains and losses
resulting from changes in the PV of DBO because of: 1) the
differences between previous actuarial assumptions and what
actually occurred (experience adjustments) or 2) changes in
actuarial assumptions The difference between actual return on plan
assets and net interest on net defined liability (asset) Changes in
the asset ceiling (excluding amounts included in net interest on
net defined liability) Remeasurements in OCI shall not be
reclassified into P&L in a subsequent period. (IAS 19.122)
43
44. 4. DETERMINE NET DEFINED BENEFIT LIABILITY (ASSET) Current
Service costs Past Service costs Gain/loss on settlement Net
interest on the net defined liability (asset) Remeasurements in OCI
= Defined Benefit Obligation Opening Balance +Contributions +
Investment Returns - Benefits paid = Fair value of plan assets
44
45. 4. DETERMINE NET DEFINED BENEFIT LIABILITY (ASSET) Defined
Benefit Liability - Fair value of plan assets = Net Defined Benefit
Liability (Asset) NET DEFINED BENEFIT ASSET IS MEASURED AT LOWER OF
: 1. SURPLUS IN DBP 2. ASSET CEILING 45
46. ILLUSTRATIVE EXAMPLE FOR YEAR 4 Journal Entries Memo Record
Item Remeasure ments (Gain) loss OCI Pension Expense Cash Net
Defined Benefit Liability / Asset Defined Benefit Obligation Plan
Assets Opening Balance - - - 0 324 Cr. 324 Dr.1 Current Service 238
Dr. 238 Cr. Past Service 357 Dr. 357 Cr. Net Interest 32 Dr. 32 Cr.
Expected Return 32 Cr. 32 Dr. Remeasurement s of return 12 Dr. 12
Cr.3 Contributions 600 Cr. 600 Dr.2 Actuarial gains/loss ? ?
Expense entry 12 Dr. 595 Dr. 607 Cr. Contribution entry 600 Cr. 600
Dr. Ending Balance 7 Cr. 951 Cr. 944 Cr. 1 Defined benefit plan
assumed to be fully funded at opening 2 Contributions is an assumed
figure 3 Actual return assumed as 20 and no benefits were paid in
yea46
47. WOLF CHALLENGE# 4 In addition to the current service costs
of $1,660 from Wolf Challenge #3, assume that the pension plan was
amended leading to an increased obligation for one of the employees
by $3,600. There was also a revision to the plan as the mortality
rates decreased before plans vested increasing obligation by
$19,400 for other employees. Please prepare appropriate journal
entries: DR. PENSION EXPENSE DR. OTHER COMPREHENSIVE INCOME CR. NET
DEFINED BENEFIT LIAB. CR. NET DEFINED BENEFIT LIAB 47
48. ASPE 3462- EMPLOYEE FUTURE BENEFITS 48
49. ASPE 3462 Formerly ASPE 3461 Required starting Jan 1, 2014
Apply retrospectively, in accordance with ACCOUNTING CHANGES
49
50. CHANGES IN THE STANDARD Elimination of deferral and
amortization approach Measurement Date Use of Valuation Prepared
for Accounting Purposes Past Service Costs for DCP 50
51. RECOGNITION For a defined benefit plan recognize: a)
defined benefit liability(asset) in B/S; and b) costs of the plan
either as an expense or an amount capitalized as part inventory or
PPE 51
52. WHEN TO RECOGNIZE? Defined Benefit Obligation and Cost for
Employee Future Benefits Post-Employment Benefits and Compensated
Absences that do not Vest or Accumulate Employees Render Services
in Return for the Benefits Event That Obligates the Entity Occurs
52
53. MEASUREMENT OF DBO Most recently completed actuarial
valuation prepared for funding purposes but NOT prepared using a
solvency, wind-up, or similar valuation basis; or The measurement
policy chosen must be consistent across all plans 53 Separate
actuarial valuation prepared for accounting purposesOR
54. MEASUREMENT USING ACCOUNTING VALUATION 1. Projected benefit
method prorated on services, which is the portion of the total
estimated future benefit attributed to each year of service in the
attribution period Apply when future salary levels or cost
escalation affect the amount of the employee future benefits
54
55. MEASUREMENT USING ACCOUNTING VALUATION 2. Accumulated
benefit method - benefits earned to date are based on the plan
formula, the employees history of pay, and other factors, as of the
date of determination Apply when future salary levels and cost
escalation do not affect the amount of the employee future benefits
55
56. RE-MEASUREMENT OF A DEFINED BENEFIT OBLIGATION The
actuarial valuation of DBO every 3 years Between valuations,
roll-forward technique used: a) amount from the last actuarial of
the DBO; b) increase in obligation due to the passage of time; c)
increase in obligation due to the rendering of service in the
current year; and d) any benefit payments. 56
57. LIMIT ON THE CARRYING AMOUNT OF A DEFINED BENEFIT ASSET FV
of Plan Assets > DBO, plan surplus shall be recognized as a
defined benefit asset on the B/S only to extent it is expected to
be realized Entity determines the expected future benefit that it
expects to realize from the plan surplus 57
58. LIMIT ON THE CARRYING AMOUNT OF A DEFINED BENEFIT ASSET +PV
expected future annual accruals - PV required employee
contributions and min contributions the entity is required Amount
of plan surplus that can be withdrawn = Expected Future Benefit
58
59. LIMIT ON THE CARRYING AMOUNT OF A DEFINED BENEFIT ASSET The
entity shall recognize a valuation allowance for any excess of the
plan surplus over the expected future benefit. A change in the
valuation allowance shall be recognized in income for the period in
which the change occurs. 59
60. ILLUSTRATIVE EXAMPLE 5 Assume plan surplus for the year is
$50,000 and the expected future benefit is $40,000. What would be
the entry? What if afterwards the expected benefit increases to
$45,000? JOURNAL ENTRIES Entry to set up valuation allowance: DR.
Expense $10,000 CR. Valuation Allowance $10,000 Change in valuation
allowance: DR. Valuation Allowance $5,000 CR. Expense $5,000
60
61. DETERMINATION OF THE COST FOR THE PERIOD The total cost of
a defined benefit plan for a period comprises: (a) changes in the
DBO other than those resulting from benefit payments to plan
members; (b) the amount of any plan assets transferred and any
payments made directly by the entity in connection with a
settlement; (c) the actual return on plan assets; (d) Any changes
in a valuation allowance. The total cost of a defined benefit plan
is reduced by any employee contributions as it reduces the cost to
the company. 61
62. DETERMINATION OF THE COST FOR THE PERIOD Actual Return on
plan assets based: +FV of Plan Assets Beginning of Period - Benefit
Payments or Settlements + Contributions to the Plan - FV of Plan
Assets Ending of Period - Costs of Managing Assets Paid by Plan
Sponsor = Actual Return on Plan Assets 62
63. COMPONENTS OF THE COST FOR THE PERIOD Current Service costs
Finance Cost Re-measurements and Other Items = Pension expense
reported in Profit & Loss 63
64. COMPONENTS OF THE COST FOR THE PERIOD Re-measurements and
other item Difference between Actual Return on Plan Assets and
Return calculated Actuarial Gains and Losses Effect of any
valuation allowance Past Service Cost Gains/Losses arising from
Settlements and Curtailments = Aggregate of Re-measurements and
Other Items 64
65. WOLF CHALLENGE# 5 Dunder Mifflin Inc.s (DM) accrued DBO at
the beginning of 2014 is $1,450,000, the beginning 2014 FV of plan
assets is $1,000,000 (return on plan assets same as expected for
2014 and no management fees), and discount rate used in determining
the DBO at the start of the period is 10%. During 2014 DM
contributed $225,000 and the plan paid out $125,000. During 2014,
DM faced an actuarial gain of $20,000 due to changes in estimates
and saw current service cost of $75,000. What is the 2014 cost of
the plan under ASPE? (Hint use the components of the cost for the
period) 65
66. MULTI-EMPLOYER VS. MULTIPLE EMPLOYER IFRS ASPE
Multi-employer plans can be either DC or DB (other than state
plans) Pools assets contributed by various entities Account for its
Proportionate share If not sufficient information, apply DC Group
Administration Plan aggregation of single employer plans, but
claims segregated, can be DB or DC Account for Plan assets on its
proportionate interest in the assets Multiemployer plan are DB, two
or more unrelated entities contribute Pools assets contributed by
various entities Account for its Proportionate share If not
sufficient information, apply DC Multiple-Employer plan, unlike
Multiemployer maintains separate accounts for each entity and
generally not collectively bargained Account for Plan assets on its
proportionate interest in the assets 66
67. DBP DISCLOSURES UNDER IAS 19 Under IAS 19, an entity must
disclose information that: explains the characteristics of the DB
plans and risks associated with them, identifies/explains amounts
in its FS arising from its DB plans, and describes how its DB plans
may affect the amount, timing, and uncertainty of the entitys
future cash flows. *Under ASPE 3462, disclosure is much more
general in nature. 67
68. DBP DISCLOSURES UNDER ASPE 3462 a) General description of
each type of plan b) FV of plan assets at end of period c) DBO at
end of period d) Plan surplus/deficit at end of period e)
Difference between plan surplus/deficit at end of period f) Amount
of re-measurements g) Effective date of most recent actuarial
valuation h) Nature and effect of significant policies changes in
contractual elements of plans during period i) Whether a funding or
accounting valuation was used j) Any changes between type of
valuation used to measure plan 68
69. BCE EXAMPLE 69
70. SHORT-TERM EMPLOYEE BENEFITS (IAS 19.9) Employee benefits
expected to be settled wholly before 12 months after the end of the
annual reporting period in which employees rendered service.
Recognition and Measurement Entity recognizes the undiscounted
amount of short-term benefits expected to be paid: (a) As a
liability after deducting any amount paid. (b) As an expense,
unless another IFRS requires inclusion of benefits in cost of
asset. 70
71. I) SHORT-TERM PAID ABSENCES Two categories for short-term
paid absences: (a) Accumulating absences, or (b) Non-accumulating
absences 71
72. ACCUMULATING PAID ABSENCES Paid absences that carry forward
and can be used in future periods, if not used fully in current
period. Can be vesting or non-vesting. Recognition: Recognize the
expected cost/liability of paid absences when the employees render
service. Measurement: Measure the expected cost of accumulating
paid absences as the additional amount the entity expects to pay,
based on unused entitlement that has accumulated at the end of the
period. 72
73. WOLF CHALLENGE #6 Dunder Mifflins employees are entitled to
5 working days of paid sick leave for each year. Unused sick leave
may be carried forward until termination. Note that sick leave days
are taken on a FIFO basis. Given the following information for Jim
Halpert at December 31, 2013, what amount of short-term paid
absences should the entity record at year- end as an obligation?
Daily wage rate in 2013 Accumulated sick leave days as at 1/1/2013
Sick leave days earned in 2013 Sick leave days taken in 2013
Percentage wage increase effective 1/1/2014 $310 2 5 3 2% 73
74. NON-ACCUMULATING PAID ABSENCES Paid absences that do not
carry forward, but instead expire at period end if not used in
full. Note that these are non-vesting. RECOGNITION: Entity
recognizes the cost/liability of paid absences when absences
actually occur. 74
75. II) PROFIT SHARING AND BONUS PLANS Recognition: Entity
recognizes the expected cost of profit sharing and bonus when: (a)
The entity has a present legal or constructive obligation to make
such payments, and (b) A reliable estimate of the obligation can be
made. 75
76. OTHER LONG-TERM EMPLOYEE BENEFITS Employee benefits not
expected to be settled wholly within 12 months after the end of the
period in which employees rendered service. RECOGNITION AND
MEASUREMENT IAS 19 prescribes a modified application of the post-
employment benefit model for other long-term employee benefits.
ASPE implicitly addresses long term benefits as compensated
absences that best or accumulate. An entity recognizes a liability
as employees render service (accumulating), or when an absences
occur (non- accumulating). 76
77. TERMINATION BENEFITS (IAS) (IAS 19.159) Results from either
an entitys decision to terminate employment or an employees
decision to accept an entitys offer of benefits in exchange for
employment termination. Recognition: Recognize liability and
expense for termination benefits at earlier of: (a) When entity can
no longer withdraw the offer of benefits, and (b) When entity
recognizes costs for restructuring as per IAS 37 and involves
termination benefits. 77
78. TERMINATION BENEFITS (IAS) Measurement: If termination
benefits to be settled wholly before 12 months apply short-term
employee benefits provisions If termination benefits to be settled
wholly after 12 months apply other long-term employee benefits
provisions 78
79. TERMINATION BENEFITS (ASPE) There are 2 types of
termination benefits: (a) Special termination benefits, and (b)
Contractual termination benefits 79
80. I) SPECIAL TERMINATION BENEFITS Benefits are not
contractual and are offered to employees in exchange for voluntary
or involuntary termination of service. Recognition: i) Voluntary:
Liability and expense recognized when employee accepts termination
offer and the amount can be reasonably estimated. ii) Involuntary:
Liability and expense recognized in period in which several
conditions must be met. 80
81. II) CONTRACTUAL TERMINATION BENEFITS Benefits that are
required to be paid to employees under existing terms of a benefit
plan, payable in event of involuntary termination if a specified
event occurs. Recognition: Liability recognized when it is probable
that employees will be entitled to benefits and the amount
reasonably estimated. 81
82. DISCLOSURE IAS 19 : Disclosures about short-term employee
benefits, other long-term employee benefits, or termination
benefits not stipulated, but refers to IAS 24 and IAS 1 ASPE 3462:
Entity discloses the nature and effect of any termination benefits
provided in the period in the FS. 82
83. IFRIC 14 Major Issues: 1) When refunds or reductions in
future contributions should be regarded as available, 2) How a
minimum funding requirement affects the availability of reductions
in future contributions, and 3) When a minimum funding requirement
might give rise to a liability. 83
84. FUNDAMENTAL FRAMEWORK SHORT TERM BENEFITS POST EMPLOYMENT
BENEFITS TERMINATION & OTHER LONG TERM BENEFITS Paid within 12
months. Apply to current employees Applies to benefits paid after-
employment ends Termination benefits paid in exchange to terminate
employees (i.e. Severance) Other long term benefits include
deferred compensatio n, jubilee, and long-term leave 84
85. DEFINED CONTRIBUTION DEFINED BENEFIT LIABILITY recognized
for un- contributed amounts. EXPENSE recognized for amounts due.
CURREN T SERVICE PAST SERVICE SETTLE MENT GAINS/L OSSES ACTUARI AL
GAINS/L OSSES PENSION EXPENSE (PROFIT AND LOSS) REMEAS UREME NTS IN
OCI DEFINED BENEFIT OBLIGATION 85
86. DEFINED BENEFIT OBLIGATION - FAIR VALUE OF PLAN ASSETS
(CONTRIBUTIONS BENEFITS PAID + RETURNS) NET DEFINED BENEFIT
LIABILITY (ASSET) 86
87. THANK YOU VIEWERS 87 Q1 Q2 Q3 Q4 Q5 Q6
88. Year 1 2 3 4 5 CU CU CU CU CU Benefit attributed to: prior
years - 131 262 786 1,049 current year (1% of final salary) 131 131
131 262 262 current and prior years 131 262 393 1,049 1,311 Opening
obligation - 89 196 324 952 Interest at 10% - 9 20 32 95 Current
service cost 89 98 108 238 262 Past Service cost 357 Closing
obligation 89 196 324 952 1,310 APPENDIX: PAST SERVICE COSTS
88