AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
Employee Benefits
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....ans. 3. The employee benefits to which this Standard applies include those provided: (a) under formal plans or other formal agreements between an enterprise and individual employees, groups of employees or their representatives; (b) under legislative requirements, or through industry arrangements, whereby enterprises are required to contribute to state, industry or other multi-employer plans; or (c) by those informal practices that give rise to an obligation. Informal practices give rise to an obligation where the enterprise has no realistic alternative but to pay employee benefits. An example of such an obligation is where a change in the enterprise's informal practices would cause unacceptable damage to its relationship with employees. 4. Employee benefits include: (a) short-term employee benefits, such as wages, salaries and social security contributions (e.g., contribution to an insurance company by an employer to pay for medical care of its employees), paid annual leave, profitsharing and bonuses (if payable within twelve months of the end of the period) and non-monetary benefits (such as medical care, housing, cars and free or subsidi....
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.... 7.6 Defined benefit plans are post-employment benefit plans other than defined contribution plans. 7.7 Multi-employer plans are defined contribution plans (other than state plans) or defined benefit plans (other than state plans) that: (a) pool the assets contributed by various enterprises that are not under common control; and (b) use those assets to provide benefits to employees of more than one enterprise, on the basis that contribution and benefit levels are determined without regard to the identity of the enterprise that employs the employees concerned. 7.8 Other long-term employee benefits are employee benefits (other than post-employment benefits and termination benefits) which do not fall due wholly within twelve months after the end of the period in which the employees render the related service. 7.9 Termination benefits are employee benefits payable as a result of either: (a) an enterprise's decision to terminate an employee's employment before the normal retirement date; or (b) an employee's decision to accept voluntary redundancy in exchange for those benefits (voluntary retirement). 7.10 Vested employee benefits are empl....
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....hanged or a liability settled between knowledgeable, willing parties in an arm's length transaction. 7.18 The return on plan assets is interest, dividends and other revenue derived from the plan assets, together with realised and unrealised gains or losses on the plan assets, less any costs of administering the plan and less any tax payable by the plan itself. 7.19 Actuarial gains and losses comprise: (a) experience adjustments (the effects of differences between the previous actuarial assumptions and what has actually occurred); and (b) the effects of changes in actuarial assumptions. 7.20 Past service cost is the change in the present value of the defined benefit obligation for employee service in prior periods, resulting in the current period from the introduction of, or changes to, post-employment benefits or other long-term employee benefits. Past service cost may be either positive (where benefits are introduced or improved) or negative (where existing benefits are reduced). Short-term Employee Benefits 8. Short-term employee benefits include items such as: (a) wages, salaries and social security contributions; (b) short-term....
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....m disability, and maternity or paternity. Entitlement to compensated absences falls into two categories: (a) accumulating; and (b) non-accumulating. 13. Accumulating compensated absences are those that are carried forward and can be used in future periods if the current period's entitlement is not used in full. Accumulating compensated absences may be either vesting (in other words, employees are entitled to a cash payment for unused entitlement on leaving the enterprise) or non-vesting (when employees are not entitled to a cash payment for unused entitlement on leaving). An obligation arises as employees render service that increases their entitlement to future compensated absences. The obligation exists, and is recognised, even if the compensated absences are non-vesting, although the possibility that employees may leave before they use an accumulated non-vesting entitlement affects the measurement of that obligation. 14. An enterprise should measure the expected cost of accumulating compensated absences as the additional amount that the enterprise expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date. 15. T....
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....e expected cost of profit-sharing and bonus payments under paragraph 10 when, and only when: (a) the enterprise has a present obligation to make such payments as a result of past events; and (b) a reliable estimate of the obligation can be made. A present obligation exists when, and only when, the enterprise has no realistic alternative but to make the payments. 18. Under some profit-sharing plans, employees receive a share of the profit only if they remain with the enterprise for a specified period. Such plans create an obligation as employees render service that increases the amount to be paid if they remain in service until the end of the specified period. The measurement of such obligations reflects the possibility that some employees may leave without receiving profit-sharing payments. Example Illustrating Paragraph 18 A profit-sharing plan requires an enterprise to pay a specified proportion of its net profit for the year to employees who serve throughout the year. If no employees leave during the year, the total profit-sharing payments for the year will be 3% of net profit. The enterprise estimates that staff turnover will reduce the payments to....
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.... defined contribution plans or defined benefit plans, depending on the economic substance of the plan as derived from its principal terms and conditions. Under defined contribution plans: (a) the enterprise's obligation is limited to the amount that it agrees to contribute to the fund. Thus, the amount of the post-employment benefits received by the employee is determined by the amount of contributions paid by an enterprise (and also by the employee) to a post-employment benefit plan or to an insurance company, together with investment returns arising from the contributions; and (b) in consequence, actuarial risk (that benefits will be less than expected) and investment risk (that assets invested will be insufficient to meet expected benefits) fall on the employee. 26. Examples of cases where an enterprise's obligation is not limited to the amount that it agrees to contribute to the fund are when the enterprise has an obligation through: (a) a plan benefit formula that is not linked solely to the amount of contributions; or (b) a guarantee, either indirectly through a plan or directly, of a specified return on contributions; or (c) in....
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.... to pay the benefits falling due in the same period; and future benefits earned during the current period will be paid out of future contributions; and (b) employees' benefits are determined by the length of their service and the participating enterprises have no realistic means of withdrawing from the plan without paying a contribution for the benefits earned by employees up to the date of withdrawal. Such a plan creates actuarial risk for the enterprise; if the ultimate cost of benefits already earned at the balance sheet date is more than expected, the enterprise will have to either increase its contributions or persuade employees to accept a reduction in benefits. Therefore, such a plan is a defined benefit plan. 32. Where sufficient information is available about a multi-employer plan which is a defined benefit plan, an enterprise accounts for its proportionate share of the defined benefit obligation, plan assets and post-employment benefit cost associated with the plan in the same way as for any other defined benefit plan. However, in some cases, an enterprise may not be able to identify its share of the underlying financial position and performance of the plan wi....
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....s, a cost equal to their contribution payable for the period. 36. AS 29, Provisions, Contingent Liabilities and Contingent Assets requires an enterprise to recognise, or disclose information about, certain contingent liabilities. In the context of a multi-employer plan, a contingent liability may arise from, for example: (a) actuarial losses relating to other participating enterprises because each enterprise that participates in a multi-employer plan shares in the actuarial risks of every other participating enterprise; or (b) any responsibility under the terms of a plan to finance any shortfall in the plan if other enterprises cease to participate. State Plans 37. An enterprise should account for a state plan in the same way as for a multi-employer plan (see paragraphs 29 and 30). 38. State plans are established by legislation to cover all enterprises (or all enterprises in a particular category, for example, a specific industry) and are operated by national or local government or by another body (for example, an autonomous agency created specifically for this purpose) which is not subject to control or influence by the reporting enterprise. Some plan....
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....n, the payment of the premiums does not amount to a defined contribution arrangement. It follows that the enterprise: (a) accounts for a qualifying insurance policy as a plan asset (see paragraph 7); and (b) recognises other insurance policies as reimbursement rights (if the policies satisfy the criteria in paragraph 103). 43. Where an insurance policy is in the name of a specified plan participant or a group of plan participants and the enterprise does not have any obligation to cover any loss on the policy, the enterprise has no obligation to pay benefits to the employees and the insurer has sole responsibility for paying the benefits. The payment of fixed premiums under such contracts is, in substance, the settlement of the employee benefit obligation, rather than an investment to meet the obligation. Consequently, the enterprise no longer has an asset or a liability. Therefore, an enterprise treats such payments as contributions to a defined contribution plan. Post-employment Benefits: Defined Contribution Plans 44. Accounting for defined contribution plans is straightforward because the reporting enterprise's obligation for each period is determined ....
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....lity of the reporting enterprise to measure the obligations under the defined benefit plans, it is recognised that for doing so the enterprise would normally use the services of a qualified actuary. Recognition and Measurement 50. Defined benefit plans may be unfunded, or they may be wholly or partly funded by contributions by an enterprise, and sometimes its employees, into an entity, or fund, that is legally separate from the reporting enterprise and from which the employee benefits are paid. The payment of funded benefits when they fall due depends not only on the financial position and the investment performance of the fund but also on an enterprise's ability to make good any shortfall in the fund's assets. Therefore, the enterprise is, in substance, underwriting the actuarial and investment risks associated with the plan. Consequently, the expense recognised for a defined benefit plan is not necessarily the amount of the contribution due for the period. 51. Accounting by an enterprise for defined benefit plans involves the following steps: (a) using actuarial techniques to make a reliable estimate of the amount of benefit that employees have earned in return ....
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....ives of employees. Balance Sheet 55. The amount recognised as a defined benefit liability should be the net total of the following amounts: (a) the present value of the defined benefit obligation at the balance sheet date (see paragraph 65); (b) minus any past service cost not yet recognised (see paragraph 94); (c) minus the fair value at the balance sheet date of plan assets (if any) out of which the obligations are to be settled directly (see paragraphs 100-102). 56. The present value of the defined benefit obligation is the gross obligation, before deducting the fair value of any plan assets. 57. An enterprise should determine the present value of defined benefit obligations and the fair value of any plan assets with sufficient regularity that the amounts recognised in the financial statements do not differ materially from the amounts that would be determined at the balance sheet date. 58. The detailed actuarial valuation of the present value of defined benefit obligations may be made at intervals not exceeding three years. However, with a view that the amounts recognised in the financial statements do not differ materially from the amou....
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....tandard requires or permits their inclusion in the cost of an asset: (a) current service cost (see paragraphs 64-91); (b) interest cost (see paragraph 82); (c) the expected return on any plan assets (see paragraphs 107-109) and on any reimbursement rights (see paragraph 103); (d) actuarial gains and losses (see paragraphs 92-93); (e) past service cost to the extent that paragraph 94 requires an enterprise to recognise it; (f) the effect of any curtailments or settlements (see paragraphs 110 and 111); and (g) the effect of the limit in paragraph 59 (b), i.e., the extent to which the amount determined under paragraph 55 (if negative) exceeds the amount determined under paragraph 59 (b). 62. Other Accounting Standards require the inclusion of certain employee benefit costs within the cost of assets such as tangible fixed assets (see AS 10, Property, Plant and Equipment). Any post-employment benefit costs included in the cost of such assets include the appropriate proportion of the components listed in paragraph 61. Illustration 63. Illustration I attached to the Standard illustrates describing the components of th....
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....bsp; 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 (see note 1) - 89 196 324 476 Interest at 10% - 9 20 33 48 Current Service Cost (see note 2) 89 98 108 119 131 Closing Obligation (see note 3) 89 196 324 476 655 Notes: 1. The Opening Obligation is the present value of benefit attributed to prior years. 2. The Current Service Cost is the present value of benefit attributed to the current year. 3. The Closing Obligation is the present value of benefit attributed to current and prior years. Attributing Benefit to Periods of Service 68. In determining the present value of its defined benefit obligations and the related current service cost and, where applicable, past service cost, an enterprise....
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.... is attributed to each year of service. The current service cost is the present value of that benefit. The present value of the defined benefit obligation is the present value of monthly pension payments of 0.2% of final salary, multiplied by the number of years of service up to the balance sheet date. The current service cost and the present value of the defined benefit obligation are discounted because pension payments begin at the age of 60. 70. Employee service gives rise to an obligation under a defined benefit plan even if the benefits are conditional on future employment (in other words they are not vested). Employee service before the vesting date gives rise to an obligation because, at each successive balance sheet date, the amount of future service that an employee will have to render before becoming entitled to the benefit is reduced. In measuring its defined benefit obligation, an enterprise considers the probability that some employees may not satisfy any vesting requirements. Similarly, although certain post- employment benefits, for example, post-employment medical benefits, become payable only if a specified event occurs when an employee is no longer employed, an....
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....r length of service. For employees who join before the age of 30, service first leads to benefits under the plan at the age of 30 (an employee could leave at the age of 25 and return at the age of 28, with no effect on the amount or timing of benefits). Those benefits are conditional on further service. Also, service beyond the age of 50 will lead to no material amount of further benefits. For these employees, the enterprise attributes benefit of Rs. 100 (Rs. 2,000 divided by 20) to each year from the age of 30 to the age of 50. For employees who join between the ages of 30 and 40, service beyond twenty years will lead to no material amount of further benefits. For these employees, the enterprise attributes benefit of Rs. 100 (Rs. 2,000 divided by 20) to each of the first twenty years. For an employee who joins at the age of 50, service beyond ten years will lead to no material amount of further benefits. For this employee, the enterprise attributes benefit of Rs. 200 (Rs. 2,000 divided by 10) to each of the first ten years. For all employees, the current service cost and the present value of the obligation reflect the probability that the employee may not complete the ....
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....tributed to each period is a constant proportion of the salary to which the benefit is linked. Example Illustrating Paragraph 72 Employees are entitled to a benefit of 3% of final salary for each year of service before the age of 55. Benefit of 3% of estimated final salary is attributed to each year up to the age of 55. This is the date when further service by the employee will lead to no material amount of further benefits under the plan. No benefit is attributed to service after that age. Actuarial Assumptions 73. Actuarial assumptions comprising demographic assumptions and financial assumptions should be unbiased and mutually compatible. Financial assumptions should be based on market expectations, at the balance sheet date, for the period over which the obligations are to be settled. 74. Actuarial assumptions are an enterprise's best estimates of the variables that will determine the ultimate cost of providing post-employment benefits. Actuarial assumptions comprise: (a) demographic assumptions about the future characteristics of current and former employees (and their dependants) who are eligible for benefits. Demographic assumptions deal with matter....
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....ated timing of benefit payments. In practice, an enterprise often achieves this by applying a single weighted average discount rate that reflects the estimated timing and amount of benefit payments and the currency in which the benefits are to be paid. 81. In some cases, there may be no government bonds with a sufficiently long maturity to match the estimated maturity of all the benefit payments. In such cases, an enterprise uses current market rates of the appropriate term to discount shorter term payments, and estimates the discount rate for longer maturities by extrapolating current market rates along the yield curve. The total present value of a defined benefit obligation is unlikely to be particularly sensitive to the discount rate applied to the portion of benefits that is payable beyond the final maturity of the available government bonds. 82. Interest cost is computed by multiplying the discount rate as determined at the start of the period by the present value of the defined benefit obligation throughout that period, taking account of any material changes in the obligation. The present value of the obligation will differ from the liability recognised in the balance s....
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....nt that they change benefits for service after the change. 87. Some post-employment benefits are linked to variables such as the level of state retirement benefits or state medical care. The measurement of such benefits reflects expected changes in such variables, based on past history and other reliable evidence. 88. Assumptions about medical costs should take account of estimated future changes in the cost of medical services, resulting from both inflation and specific changes in medical costs. 89. Measurement of post-employment medical benefits requires assumptions about the level and frequency of future claims and the cost of meeting those claims. An enterprise estimates future medical costs on the basis of historical data about the enterprise's own experience, supplemented where necessary by historical data from other enterprises, insurance companies, medical providers or other sources. Estimates of future medical costs consider the effect of technological advances, changes in health care utilisation or delivery patterns and changes in the health status of plan participants. 90. The level and frequency of claims is particularly sensitive to the age, health status a....
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....are already vested immediately following the introduction of, or changes to, a defined benefit plan, an enterprise should recognise past service cost immediately. 95. Past service cost arises when an enterprise introduces a defined benefit plan or changes the benefits payable under an existing defined benefit plan. Such changes are in return for employee service over the period until the benefits concerned are vested. Therefore, past service cost is recognised over that period, regardless of the fact that the cost refers to employee service in previous periods. Past service cost is measured as the change in the liability resulting from the amendment (see paragraph 65). Example Illustrating Paragraph 95 An enterprise operates a pension plan that provides a pension of 2% of final salary for each year of service. The benefits become vested after five years of service. On 1 January 20X5 the enterprise improves the pension to 2.5% of final salary for each year of service starting from 1 January 20X1. At the date of the improvement, the present value of the additional benefits for service from 1 January 20X1 to 1 January 20X5 is as follows: Employees with more than five se....
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.... reduces benefits payable under an existing defined benefit plan, the resulting reduction in the defined benefit liability is recognised as (negative) past service cost over the average period until the reduced portion of the benefits becomes vested. 99. Where an enterprise reduces certain benefits payable under an existing defined benefit plan and, at the same time, increases other benefits payable under the plan for the same employees, the enterprise treats the change as a single net change. Recognition and Measurement: Plan Assets Fair Value of Plan Assets 100. The fair value of any plan assets is deducted in determining the amount recognised in the balance sheet under paragraph 55. When no market price is available, the fair value of plan assets is estimated; for example, by discounting expected future cash flows using a discount rate that reflects both the risk associated with the plan assets and the maturity or expected disposal date of those assets (or, if they have no maturity, the expected period until the settlement of the related obligation). 101. Plan assets exclude unpaid contributions due from the reporting enterprise to the fund, as well as any nontran....
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....alance sheet being the present value of obligation 1,258 Rights under insurance policies that exactly match the amount and timing of some of the benefits payable under the plan. 1,092 Those benefits have a present value of Rs. 1,092 106. If the right to reimbursement arises under an insurance policy that exactly matches the amount and timing of some or all of the benefits payable under a defined benefit plan, the fair value of the reimbursement right is deemed to be the present value of the related obligation, as described in paragraph 55 (subject to any reduction required if the reimbursement is not recoverable in full). Return on Plan Assets 107. The expected return on plan assets is a component of the expense recognised in the statement of profit and loss. The difference between the expected return on plan assets and the actual return on plan assets is an actuarial gain or loss. 108. The expected return on plan assets is based on market expectations, at the beginning of the period, for returns over the entire life of the related obligation. The expected return on plan assets reflects changes in the fair value of plan assets held during ....
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.... defined benefit obligation; (b) any resulting change in the fair value of the plan assets; (c) any related past service cost that, under paragraph 94, had not previously been recognised. 111. Before determining the effect of a curtailment or settlement, an enterprise should remeasure the obligation (and the related plan assets, if any) using current actuarial assumptions (including current market interest rates and other current market prices). 112. A curtailment occurs when an enterprise either: (a) has a present obligation, arising from the requirement of a statute/ regulator or otherwise, to make a material reduction in the number of employees covered by a plan; or (b) amends the terms of a defined benefit plan such that a material element of future service by current employees will no longer qualify for benefits, or will qualify only for reduced benefits. A curtailment may arise from an isolated event, such as the closing of a plant, discontinuance of an operation or termination or suspension of a plan. An event is material enough to qualify as a curtailment if the recognition of a curtailment gain or loss would have a material effe....
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....f Rs. 50. The enterprise had first adopted this Standard one year before. This increased the net liability by Rs. 100, which the enterprise chose to recognise over five years (see paragraph 145(b)). The curtailment reduces the net present value of the obligation by Rs. 100 to Rs. 900. Of the previously unrecognised past service cost and transitional amounts, 10% (Rs. 100/Rs. 1000) relates to the part of the obligation that was eliminated through the curtailment. Therefore, the effect of the curtailment is as follows: (Amount in Rs.) Before Curtailment After curtailment gain curtailment Net present value of obligation 1,000 (100) 900 Fair value of plan assets (820) - (820) 180 (100) 80 Unrecognised past service cost (50) 5 (45) Unrecognised transitional amount (100x4/5) (80) 8 (72) Net liability recognised in balance sheet (50) (87) (37) An asset of Rs. 37 will be recognised (it is assumed that the amount under paragraph 59(b) is higher than Rs. 37). Provided that a Small and Medium-sized Company as defined in the Notification, may not ap....
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.... (v) foreign currency exchange rate changes on plans measured in a currency different from the enterprise's reporting currency, (vi) benefits paid, (vii) past service cost, (viii) amalgamations, (ix) curtailments, and (x) settlements. (d) an analysis of the defined benefit obligation into amounts arising from plans that are wholly unfunded and amounts arising from plans that are wholly or partly funded. (e) a reconciliation of the opening and closing balances of the fair value of plan assets and of the opening and closing balances of any reimbursement right recognised as an asset in accordance with paragraph 103 showing separately, if applicable, the effects during the period attributable to each of the following: (i) expected return on plan assets, (ii) actuarial gains and losses, (iii) foreign currency exchange rate changes on plans measured in a currency different from the enterprise's reporting currency, (iv) contributions by the employer, (v) contributions by plan participants, (vi) benefits paid, (vii) amalgamations, and (viii) settlements. ....
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.... sheet date, including, where applicable: (i) the discount rates; (ii) the expected rates of return on any plan assets for the periods presented in the financial statements; (iii) the expected rates of return for the periods presented in the financial statements on any reimbursement right recognised as an asset in accordance with paragraph 103; (iv) medical cost trend rates; and (v) any other material actuarial assumptions used. An enterprise should disclose each actuarial assumption in absolute terms (for example, as an absolute percentage) and not just as a margin between different percentages or other variables. Apart from the above actuarial assumptions, an enterprise should include an assertion under the actuarial assumptions to the effect that estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. (m) the effect of an increase of one percentage point and the effect of a decrease of one percentage point in the assumed medical cost trend rates on: (i) the aggregate o....
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....ch disclosures are provided in the form of weighted averages or of relatively narrow ranges. 123. Paragraph 30 requires additional disclosures about multi-employer defined benefit plans that are treated as if they were defined contribution plans. 124. Where required by AS 18, Related Party Disclosures, an enterprise discloses information about: (a) related party transactions with post-employment benefit plans; and (b) post-employment benefits for key management personnel. 125. Where required by AS 29, Provisions, Contingent Liabilities and Contingent Assets an enterprise discloses information about contingent liabilities arising from post-employment benefit obligations. Illustrative Disclosures 126. Illustration II attached to the Standard contains illustrative disclosures. Provided that a Small and Medium-sized Company, as defined in the Notification, may not apply the disclosure requirements laid down in paragraphs 119 to 123 of the Standard in respect of accounting for defined benefit plans. However, such company should disclose actuarial assumptions as per paragraph 120(l) of the Standard. Other Long-term Employee Benefits 127. Other lo....
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....m employee benefit is long- term disability benefit. If the level of benefit depends on the length of service, an obligation arises when the service is rendered. Measurement of that obligation reflects the probability that payment will be required and the length of time for which payment is expected to be made. If the level of benefit is the same for any disabled employee regardless of years of service, the expected cost of those benefits is recognised when an event occurs that causes a long-term disability. Provided that a Small and Medium-sized Company, as defined in the Notification, may not apply the recognition and measurement principles laid down in paragraphs 129 to 131 of the Standard in respect of accounting for other long-term employee benefits. However, such a company should actuarially determine and provide for the accrued liability in respect of other long-term employee benefits as follows: * The method used for actuarial valuation should be the Projected Unit Credit Method ; and * The discount rate used should be determined by reference to market yields at the balance sheet date on government bonds as per paragraph 78 of the Standard. Disclosur....
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....an enterprise accounts for them as postemployment benefits. Some enterprises provide a lower level of benefit for voluntary termination at the request of the employee (in substance, a post-employment benefit) than for involuntary termination at the request of the enterprise. The additional benefit payable on involuntary termination is a termination benefit. 137. Termination benefits are recognised as an expense immediately. 138. Where an enterprise recognises termination benefits, the enterprise may also have to account for a curtailment of retirement benefits or other employee benefits (see paragraph 110). Measurement 139. Where termination benefits fall due more than 12 months after the balance sheet date, they should be discounted using the discount rate specified in paragraph 78. Provided that a Small and Medium-sized Company, as defined in the Notification, may not discount amounts that fall due more than 12 months after the balance sheet date. Disclosure 140. Where there is uncertainty about the number of employees who will accept an offer of termination benefits, a contingent liability exists. As required by AS 29, Provisions, Contingent Liabilities a....
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....djustment against the opening balance of revenue reserves and surplus (as adjusted by any related tax expense), or (b) as an expense on a straight-line basis over up to five years from the date of adoption. If an enterprise chooses (b), the enterprise should: (i) apply the limit described in paragraph 59(b) in measuring any asset recognised in the balance sheet; (ii) disclose at each balance sheet date (1) the amount of the increase that remains unrecognised; and (2) the amount recognised in the current period; (iii) limit the recognition of subsequent actuarial gains (but not negative past service cost) only to the extent that the net cumulative unrecognised actuarial gains (before recognition of that actuarial gain) exceed the unrecognised part of the transitional liability; and (iv) include the related part of the unrecognised transitional liability in determining any subsequent gain or loss on settlement or curtailment. If the transitional liability is less than the liability that would have been recognised at the same date as per the pre-revised AS 15, the enterprise should recognise that decrease immediately as an adjustment ....
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....eferred cannot be carried forward to accounting periods commencing on or after 1st April, 2010. Illustration I Illustration This illustration is illustrative only and does not form part of the Standard. The purpose of this illustration is to illustrate the application of the Standard to assist in clarifying its meaning. Extracts from statements of profit and loss and balance sheets are provided to show the effects of the transactions described below. These extracts do not necessarily conform with all the disclosure and presentation requirements of other Accounting Standards. Background Information The following information is given about a funded defined benefit plan. To keep interest computations simple, all transactions are assumed to occur at the year end. The present value of the obligation and the fair value of the plan assets were both Rs. 1,000 at 1 April, 20X4. (Amount in Rs.) 20X4-X5 20X5-X6 20X6-X7 Discount rate at start of year 10.0% 9.0% 8.0% Expected rate of return on plan assets at start of year 12.0% 11.1% 10.3% Current service cost 130 140 150 Benefits paid 150 180 190 Contrib....
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....etermine the amounts to be recognised in the balance sheet and statement of profit and loss, and the related analyses to be disclosed in accordance with paragraphs 120 (f), (g) and (j) of the Standard (the analyses required to be disclosed in accordance with paragraph 120(c) and (e) are given in the section of this Illustration 'Changes in the Present Value of the Obligation and in the Fair Value of the Plan Assets'). These are as follows: (Amount in Rs.) 20X4-X5 20X5-X6 20X6-X7 Present value of the obligation 1,141 1,197 1,295 Fair value of plan assets (1,092) (1,109) (1,093) 49 88 202 Unrecognised past service cost non vested benefits - (20) (10) Liability recognised in balance sheet 49 68 192 Current service cost 130 140 150 Interest cost 100 103 96 Expected return on plan assets (120) (121) (114) Net actuarial (gain) loss recognised in year 29 (63) 92 Past service cost - non-vested benefits - 10 10 Past service cost - vested benefits - 50 - Expense recognised in the statement of profit and loss 139 119 ....
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....ude equity shares issued by [name of reporting enterprise] with a fair value of Rs. 317 (20X4-X5: Rs. 281). Plan assets also include property occupied by [name of reporting enterprise] with a fair value of Rs. 200 (20X4-X5: Rs. 185). The amounts (in Rs.) recognised in the statement of profit and loss are as follows: Defined benefit Post-employment pension plans medical benefits 20X5-X6 20X4-X5 20X5-X6 20X4-X5 Current service cost 850 750 479 411 Interest on obligation 950 1,000 803 705 Expected return on plan assets (900) (650) Net actuarial losses (gains) recognised in year 2,650 (650) 250 400 Past service cost 200 200 - - Losses (gains) on curtailments and settlements 175 (390) - - Total, included in 'employee benefit expenses' 3,925 260 1,532 1,516 Actual return on plan assets 600 2,250 - Changes in the present value of the defined benefit obligation representing reconciliation of opening and closing balances thereof are as follows: ....
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....re changes in maximum state health care benefits 3% 2% The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. Assumed healthcare cost trend rates have a significant effect on the amounts recognised in the statement of profit and loss. At present, healthcare costs, as indicated in the principal actuarial assumption given above, are expected to increase at 8% p.a. A one percentage point change in assumed healthcare cost trend rates would have the following effects on the aggregate of the service cost and interest cost and defined benefit obligation: one percentage point increase one percentage point decrease Effect on the aggregate of the service cost and interest cost 190 (150) Effect on defined benefit obligation 1,000 (900) Amounts for the current and previous four periods are as follows: 20X5-X6 20X4-X5 20X3-X4 20X2-X3 20X1-X2 Defined benefit pension plans Defined benefit obligation (22,300) (18,400) (11,600) (10,582) (9,144) Plan as....