IAS 19 Flashcards
What does IAS 19 cover?
Employee Benefits - deals with all employee benefits, including salaries, commissions, and bonuses, but especially pensions
Does not deal with IFRS 2 Share based Payments
What is the accounting treatment for IAS 19 short-term employee benefits?
They are usually expensed to the profit and loss unless if an employee is a construction worker working on new factory for us then include in cost of the asset
What are IAS 19 long term employee benefits?
These are pensions
What is a Defined Contribution Scheme?
The employer agrees to make contributions to the pension fund for an employee for each year that they are employed.
The company has no obligation other than making the payments.
It is normally a fixed % of salary or an annual fixed sum.
What is a Defined Contibution Scheme?
It’s where an agreed contribution is made to the employees pension fund for each year that they are employed.
It is normally based on a fixed % of salary or an annual fixed sum.
There is no further obligation beyond the contribution. There is no additional liability on SOFP
What is the accounting treatment for a Defined Contribution Scheme?
We debit the P and L and we credit the Bank or Accruals
What is a Defined Benefit Scheme?
The company agrees and is obliged to pay you a pension from the day you retire until the day you die.
It’s normally based on the employees no of years service and their final salary
How do we calculate the Defined Benefit Obligation?
We must use an actuary to do the calculations
What is the accounting treatment for a Defined Benefit Scheme?
We must recognise the pension liability on the SOFP.
The company has an obligation to pay pensions in the future.
What is a Defined Benefit Scheme?
A Defined Benefit Scheme guarantees the employee will receive agreed benefits in the form of a pension when they retire
At the end of the year what is a Defined Benefit Scheme Contribution?
It is provided by the actuary and is the present value of the future pensions that the employee has earned up to the SOFP date.
As we are using pv of future amounts mention unwinding of the discount rate.
What are the components of a Defined Benefit Scheme plan?
We have the Fund, Obligation and net headings.
Contributions - annual amounts we put into the pension fund
Benefits paid out - pensions paid to former employees. Reduces fund and obligation.
Current service cost - increase in obligation as the employee has worked for us for another year.
Return on assets - increase in the pension fund due to investment
Cost of liabilities - the increase in the obligation as we are one year closer to having to pay out.
What is an amendment?
It is a change to pension benefits.
What is a curtailment?
It reduces the pension obligation
What is a settlement?
It reduces the Fund (normally as a result of a curtailment)
