0000000587235152 - Ias 19 493953
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IAS 19 Employee benefits
PricewaterhouseCoopers
Objectives and scope
ing and disclosure of
Short term employee benefits
Other long term employee benefits
PricewaterhouseCoopers
Post employment benefits
Termination benefits
Short term employee benefits
Examples Definition
PricewaterhouseCoopers
ing treatment
Definitions
Accumulating
Short term compensated absences Non-accumulating
PricewaterhouseCoopers
Profit sharing and bonus plans
Legal or constructive obligation
Reliable estimate Within 12 months
PricewaterhouseCoopers
Post employment benefits
Defined contribution plans
PricewaterhouseCoopers
Defined benefit plans
Defined contribution plans
ing Treatment
Expense when due
PricewaterhouseCoopers
Disclosure
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 ed for separately
PricewaterhouseCoopers
Determining the value of plan assets
Fair value?
Market price if available
PricewaterhouseCoopers
No market price? Use estimate
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 firm’s 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
PricewaterhouseCoopers
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
PricewaterhouseCoopers
Calculations (continued) Benefits attributable to years 1-5
Year
1
2
3
4
5
0
1217
2434
3651
4868
- Current year
1217
1217
1217
1217
1217
Current and prior years
1217
2434
3651
4868
6085
Benefit attributed to - Prior years
PricewaterhouseCoopers
Calculations (continued)
Year 3 example Present value of obligation at end of year 3
£3,651 1.053
=
£3,154
Present value of obligation at end of year 2
£2,434 1.052
=
£2,208
Movement
Interest cost
£946 £110
Service cost (balance) £836
PricewaterhouseCoopers
Recognition in the income statement
Current service cost Interest cost Expected return on plan assets Actuarial gains and losses (to the extent they are recognised) Past service costs (to the extent they are recognised)
PricewaterhouseCoopers
Service cost
Current
Past
Due to employee working extra year
Due to change in benefits
PricewaterhouseCoopers
Interest cost
Expected return
Unwinding of discount
Use long term rate
PricewaterhouseCoopers
Actuarial gains and losses
Experience adjustments Changes in assumptions Recognition 10% ‘corridor’
PricewaterhouseCoopers
Disclosure for defined benefit schemes
ing 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
PricewaterhouseCoopers
Multi-employer plans
Defined benefit Defined contribution Disclosures
PricewaterhouseCoopers
Other long term employee benefits
Examples
PricewaterhouseCoopers
Recognition and measurement
Disclosure
Termination benefits
Obligation to pay Demonstrably committed Discounting disclosure
PricewaterhouseCoopers
PricewaterhouseCoopers
Objectives and scope
ing and disclosure of
Short term employee benefits
Other long term employee benefits
PricewaterhouseCoopers
Post employment benefits
Termination benefits
Short term employee benefits
Examples Definition
PricewaterhouseCoopers
ing treatment
Definitions
Accumulating
Short term compensated absences Non-accumulating
PricewaterhouseCoopers
Profit sharing and bonus plans
Legal or constructive obligation
Reliable estimate Within 12 months
PricewaterhouseCoopers
Post employment benefits
Defined contribution plans
PricewaterhouseCoopers
Defined benefit plans
Defined contribution plans
ing Treatment
Expense when due
PricewaterhouseCoopers
Disclosure
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 ed for separately
PricewaterhouseCoopers
Determining the value of plan assets
Fair value?
Market price if available
PricewaterhouseCoopers
No market price? Use estimate
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 firm’s 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
PricewaterhouseCoopers
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
PricewaterhouseCoopers
Calculations (continued) Benefits attributable to years 1-5
Year
1
2
3
4
5
0
1217
2434
3651
4868
- Current year
1217
1217
1217
1217
1217
Current and prior years
1217
2434
3651
4868
6085
Benefit attributed to - Prior years
PricewaterhouseCoopers
Calculations (continued)
Year 3 example Present value of obligation at end of year 3
£3,651 1.053
=
£3,154
Present value of obligation at end of year 2
£2,434 1.052
=
£2,208
Movement
Interest cost
£946 £110
Service cost (balance) £836
PricewaterhouseCoopers
Recognition in the income statement
Current service cost Interest cost Expected return on plan assets Actuarial gains and losses (to the extent they are recognised) Past service costs (to the extent they are recognised)
PricewaterhouseCoopers
Service cost
Current
Past
Due to employee working extra year
Due to change in benefits
PricewaterhouseCoopers
Interest cost
Expected return
Unwinding of discount
Use long term rate
PricewaterhouseCoopers
Actuarial gains and losses
Experience adjustments Changes in assumptions Recognition 10% ‘corridor’
PricewaterhouseCoopers
Disclosure for defined benefit schemes
ing 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
PricewaterhouseCoopers
Multi-employer plans
Defined benefit Defined contribution Disclosures
PricewaterhouseCoopers
Other long term employee benefits
Examples
PricewaterhouseCoopers
Recognition and measurement
Disclosure
Termination benefits
Obligation to pay Demonstrably committed Discounting disclosure
PricewaterhouseCoopers
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