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

0000000587235152 - IAS 19

Documents

Transcript of 0000000587235152 - IAS 19