Actuarial Gains/Losses – NBC Institute

CR – May 2020 – L3 – Q2c – Defined Benefit Pension Plan

Recommend the accounting treatment for a defined benefit pension plan with supporting calculations.

Question

Nzema prepares its financial statements in accordance with International Financial Reporting Standards (IFRS) with a financial year end of 31 December 2018. On 1 January 2018, Nzema commenced a defined benefit pension plan for a number of head office employees. Under the pension scheme, Nzema has an obligation to provide these staff with agreed post-employment benefits. Nzema carries the actuarial and investment risk associated with the pension scheme.

The following information has been compiled from workings by Nzema’s accounting staff and actuarial reports for the 2018 financial year:

GH¢
Interest income on plan assets	16,500
Employer contributions to plan	550,000
Current service cost	600,000
Interest on plan liability	18,000
Fair value of plan assets at 31/12/2018	580,000
Present value of plan obligation at 31/12/2018	620,000

The Accountant was not sure which accounting standard to apply when accounting for the pension scheme. The only adjustment made to account for the scheme was to expense the company’s contributions of GH¢550,000 for the 2018 financial year in the Statement of Profit or Loss and Other Comprehensive Income and to credit the ‘Cash’ account.

Required:
Recommend, with appropriate calculations, the necessary accounting treatment for this accounting issue.

Answer

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Tags: Actuarial Gains/Losses, Defined Benefit Plan, Employee Benefits, Interest on Plan Liability, Pension Liability
Level: Level 3

Topic: IAS 19: Employee Benefits
Series: MAY 2020

CR – May 2018 – L3 – Q2a – IAS 19 Employee Benefits

Calculate the net actuarial gain/loss and net pension liability for a defined benefit plan under IAS 19.

Question

Zumah Ltd operates a defined benefit pension plan for its employees. On 1 April 2015, the fair value of the pension plan assets was GH¢8,200,000, and the present value of the pension plan liabilities was GH¢8,500,000. The actuary estimated that the service cost for the year to 31 March 2016 was GH¢2,100,000. The pension plan paid GH¢500,000 to retired members, and Zumah Ltd paid GH¢1,900,000 in contributions to the pension plan in the year to 31 March 2016. The actuary estimated that the discount rate for the year to 31 March 2016 was 6%.

On 31 March 2016, Zumah Ltd announced improvements to the benefits offered by the pension plan to all its members. The actuary estimated that the past service cost associated with these improvements was GH¢2,000,000. At 31 March 2016, the fair value of the pension plan assets was GH¢10,200,000, and the present value of the pension plan liabilities (including the past service costs) was GH¢12,500,000.

Required:
In accordance with IAS 19 Employee Benefits:
i) Calculate the net actuarial gain or loss that will be included in Zumah Ltd’s other comprehensive income for the year ended 31 March 2016. (3 marks)
ii) Calculate the net pension asset or liability that will be included in Zumah Ltd’s statement of financial position as at 31 March 2016. (2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Actuarial Gains/Losses, Defined Benefit Plan, Employee Benefits, Financial Position, IAS 19, Pension liabilities
Level: Level 3

Topic: IAS 19: Employee Benefits
Series: MAY 2018

CR – May 2020 – L3 – Q2c – Defined Benefit Pension Plan

Recommend the accounting treatment for a defined benefit pension plan with supporting calculations.

Question

The following information has been compiled from workings by Nzema’s accounting staff and actuarial reports for the 2018 financial year:

GH¢
Interest income on plan assets	16,500
Employer contributions to plan	550,000
Current service cost	600,000
Interest on plan liability	18,000
Fair value of plan assets at 31/12/2018	580,000
Present value of plan obligation at 31/12/2018	620,000

Required:
Recommend, with appropriate calculations, the necessary accounting treatment for this accounting issue.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Actuarial Gains/Losses, Defined Benefit Plan, Employee Benefits, Interest on Plan Liability, Pension Liability
Level: Level 3

Topic: IAS 19: Employee Benefits
Series: MAY 2020

CR – May 2018 – L3 – Q2a – IAS 19 Employee Benefits

Calculate the net actuarial gain/loss and net pension liability for a defined benefit plan under IAS 19.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Actuarial Gains/Losses, Defined Benefit Plan, Employee Benefits, Financial Position, IAS 19, Pension liabilities
Level: Level 3

Topic: IAS 19: Employee Benefits
Series: MAY 2018

Question Tag: Actuarial Gains/Losses

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CR – May 2020 – L3 – Q2c – Defined Benefit Pension Plan

Recommend the accounting treatment for a defined benefit pension plan with supporting calculations.

CR – May 2018 – L3 – Q2a – IAS 19 Employee Benefits

Calculate the net actuarial gain/loss and net pension liability for a defined benefit plan under IAS 19.

CR – May 2020 – L3 – Q2c – Defined Benefit Pension Plan

Recommend the accounting treatment for a defined benefit pension plan with supporting calculations.

CR – May 2018 – L3 – Q2a – IAS 19 Employee Benefits

Calculate the net actuarial gain/loss and net pension liability for a defined benefit plan under IAS 19.

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CR – May 2020 – L3 – Q2c – Defined Benefit Pension Plan

Recommend the accounting treatment for a defined benefit pension plan with supporting calculations.

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CR – May 2018 – L3 – Q2a – IAS 19 Employee Benefits

Calculate the net actuarial gain/loss and net pension liability for a defined benefit plan under IAS 19.

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CR – May 2020 – L3 – Q2c – Defined Benefit Pension Plan

Recommend the accounting treatment for a defined benefit pension plan with supporting calculations.

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CR – May 2018 – L3 – Q2a – IAS 19 Employee Benefits

Calculate the net actuarial gain/loss and net pension liability for a defined benefit plan under IAS 19.

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