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[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section bb_built=”1″ fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” padding_mobile=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″ custom_padding_tablet=”0px||0px|” custom_padding_last_edited=”on|desktop” prev_background_color=”#ffffff” next_background_color=”#000000″][et_pb_row][et_pb_column type=”4_4″][et_pb_toggle admin_label=”Index” _builder_version=”3.0.106″ title=”Index” open=”off”]Contents
28.1.1 Extract from FRS102: Section 28.1.
28.2 General recognition principle for all employee benefits.
28.2.1 Extract from FRS102: Section 28.3-28.5.
28.3 Short-term employee benefits.
28.3.1.2 Example of Short term benefits.
28.4 Recognition and measurement: Short-term compensated absences.
28.4.1 Extract from FRS102: Section 28.6-28.7.
28.4.2.1 Accumulated compensation.
28.4.2.2 Holiday pay accrual examples.
28.4.3 No-accumulated compensation.
28.5 Recognition: Profit-sharing and bonus plans.
28.5.1 Extract from FRS102: Section 28.8.
28.6 Post-employment benefits: defined contribution plans.
28.6.1 Extract from FRS102: Section 28.9-28.10 and 29.13-28.13A.
28.6.2.1 Post employment benefit defined.
28.6.2.2 Defined contribution scheme – defined.
28.7 Multi-employer plans and state plans.
28.7.1 Extract from FRS102: Section 28.11-28.12.
28.7.2.1 Multi-Employer plans – defined.
28.7.2.3.1 Entity’s portion of the pension assets/liabilities can subsequently be determined.
28.8 Post-employment benefits: Defined benefit plans – recognition.
28.8.1 Extract from FRS102: Section 28.10(b) and Section 28.14.
28.8.2.1 Defined benefit scheme.
28.8.2.2 Method for calculating the defined benefit plan asset and liabilities.
28.8.2.2.1 Sample journal entries for a defined benefit plan.
28.9 Measurement of the net defined benefit liability.
28.9.1 Extract from FRS102: Section 28.15, 28.15A and 28.22.
28.9.2.1.1 Defined benefit asset net deemed to be recoverable.
28.9.2.3 Determining the figure to use from the actuarial report and the related accounting.
28.10 Inclusion of both vested and unvested benefits.
28.10.1 Extract from FRS102: Section 28.16.
28.11.1 Extract from FRS102: Section 28.17.
28.12 Actuarial valuation method.
28.12.1 Extract from FRS102: Section 28.18-28.20.
28.12.2.1 The valuation method and who can perform valuation.
28.12.2.2 Illustration of projected unit credit method.
28.13 Plan introductions, changes, curtailments and settlements.
28.13.1 Extract from FRS102: Section 28.21-28.21A.
28.13.2.1 Definition of a settlement and the accounting treatment.
28.13.2.2 Definition of a curtailment and accounting treatment.
28.14 Cost of a defined benefit plan.
28.14.1 Extract from FRS102: Section 28.23.
28.14.2.1 What costs get recognised in in the profit and loss account.
28.14.2.2 What costs get recognised in other in other comprehensive income.
28.14.3 Employer contributions.
28.15 Net interest cost –defined benefit plan.
28.15.1 Extract from FRS102: Section 28.24-28.24B.
28.16 Remeasurement of the net defined benefit liability.
28.16.1 Extract from FRS102: Section 28.25-28.27.
28.17.1 Extract from FRS102: Section 28.28.
28.18 Other long-term employee benefits.
28.18.1 Extract from FRS102: Section 28.29-28.30.
28.18.2.1 Example of other long term employee benefits.
28.18.2.2 Accounting requirements.
28.19.1 Extract from FRS102: Section 28.31-28.37.
27.19.2.1 Termination benefit defined.
28.19.2.2 Terminating payment included in contract.
28.20 Group defined benefit plans.
28.20.1 Extract from FRS102: Section 28.38.
28.21 Deferred tax and pension schemes.
28.21.1 Deferred tax on the defined benefit pension scheme liability/asset
28.21.2 Deferred tax on the defined contribution pension scheme.
28.22.1 Disclosures about short-term employee benefits.
28.22.1.1 Extract from FRS102: Section 28.39.
28.22.2 Disclosures – defined contribution plans.
28.22.2.1 Extract from FRS102: Section 28.40-28.40A.
28.22.2.2.1.1 Accounting policies.
28.22.2.2.1.1.1 Employee benefits.
28.22.2.2.1.2 Notes to the financial statements.
28.22.3 Disclosures – defined benefit plans.
28.22.3.1 Extract from FRS102: Section 28.41-28.41A.
28.22.3.2.1 Accounting policies.
28.22.3.2.2 Notes to the financial statements.
28.22.3.2.3 Extract from other comprehensive income showing actual gain/loss.
28.22.4 Disclosures about other long-term benefits.
28.22.4.1 Extract from FRS102: Section 28.42-28.44.
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28.8 Post-employment benefits: Defined benefit plans – recognition
28.8.1 Extract from FRS102: Section 28.10(b) and Section 28.14
28.10 Post-employment benefit plans are classified as either defined contribution plans or defined benefit plans, depending on their principal terms and conditions:
- Defined benefit plans are post-employment benefit plans other than defined contribution plans. Under defined benefit plans, the entity’s obligation is to provide the agreed benefits to current and former employees, and actuarial risk (that benefits will cost more or less than expected) and investment risk (that returns on assets set aside to fund the benefits will differ from expectations) are borne, in substance, by the entity. If actuarial or investment experience is worse than expected, the entity’s obligation may be increased, and vice versa if actuarial or investment experience is better than expected.
Recognition
28.14 In applying the general recognition principle in paragraph 28.3 to defined benefit plans, an entity shall recognise:
(a) a liability for its obligations under defined benefit plans net of plan assets—its ‘net defined benefit liability’ (see paragraphs 28.15 to 28.22); and
(b) the net change in that liability during the period as the cost of its defined benefit plans during the period (see paragraphs 28.23 to 28.27).
28.8.2 OmniPro comment
28.8.2.1 Defined benefit scheme
Section 28.10 of FRS 102 does not specifically define a defined benefit scheme, instead it states that a defined benefit scheme is a scheme which does not meet the definition in Section 28.10 of FRS 102 as defined contribution scheme (see further details of the definition of a defined combination plan/scheme at 28.6.2.2 The key distinction between the defined benefit scheme and the contribution scheme is that the entity is legally or constructively obliged to contribute to the scheme so as to provide the agreed benefits to the current and former employees. This compares to the contribution scheme where the entity is only liable for what it has agreed to contribute. In essence, with the defined benefit scheme the entity bears both the investment and actuarial risk which is not the case for the defined contribution scheme. An example of a constructive obligation would be a historical practice of discretionary increases going beyond the formal terms of the plan or statutory minimum increases.
28.8.2.2 Method for calculating the defined benefit plan asset and liabilities
Section 28.15 of 28.27 of FRS 102 provides the rules for measuring the defined benefit plan and where the related costs are recognised in the statement of comprehensive income see further details at 28.8.2 for rules for measuring the net defined benefit liability. See further details at 28.8.2 for rules for measuring the net defined benefit liability. at 28.9.2 for vested or unvested benefits, at 28.10.2 for discounting rules: at 28.11.2 for the details of the actuarial valuation methods; at 28.12.2 for accounting for changes to plans including curtailments and settlements; at 28.13.2 and 28.14.2 for details of where the cost should be recognised in the statement of comprehensive income.
28.8.2.2.1 Sample journal entries for a defined benefit plan
Example 9: Defined benefit plan
Company A has set up a defined benefit scheme for its employees. Under the scheme it has legally agreed to provide employees with a set retirement amount based on a percent of the employees final salary. Based on advice from its actuary the Company contributes towards this scheme. The employees also contribute to the scheme. If the pension assets which the pension fund owns decrease in value, this decrease will have to be made up by the Company. Likewise, if former employees live longer than expected, the entity will have to contribute to the fund. On a yearly basis the Company’s actuary provides it with a report which values the assets and liabilities of the scheme on the basis of various assumptions. The journals usually required where a defined benefit scheme exists (assuming the employer contributions are posted to the pension liability and not to the profit and loss account) are:
| CU | |
| Cr/Dr Defined Benefit Liability | XXX |
| Dr Current/Past Service Costs | XXX |
| Dr/Cr Interest Cost | XXX |
Being journal to reflect the movement on the pension scheme liability at the year-end which would be obtained from the actuary valuation.
| CU | CU | |
| Dr Defined Benefit Liability | CUXXX | |
| Cr Bank | CUXXX |
Being journal to reflect the payments made into the pension scheme during the year
| CU | |
| Cr/Dr Actuarial Gain/Loss/Return on Plan Assets in OCI | XXX |
| Dr/Cr Defined Benefit Liability | XXX |
Being journal to reflect the actuarial gain/loss as per the Actuaries valuation
| CU | |
| Dr/Cr Deferred Tax on Actuarial Gain/Loss Posted to OCI | XXX |
| Cr/Dr Deferred Tax in P&L on All Other Postings | XXX |
| Dr/Cr Deferred Tax in Balance Sheet | XXX |
Being journal to recognise the movement on the deferred tax on the net defined benefit liability/asset
| CU | CU | |
| Dr Defined Benefit Liability | XXX | |
| Cr Bank/Wage Control Account | XXX |
Being journal to reflect the employee’s contributions withheld from the employees pay and paid over to the pension scheme on the employees behalf
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Examples
Example 1: Holiday pay accrual – carry forward of holiday leave including payment on leaving.
Example 2: Holiday pay accrual.
Example 3: Holiday pay accrual – no cash payment for untaken holidays on leaving.
Example 4: Holiday year differs to accounting year.
Example 5: Holiday year differs to accounting year.
Example 8: Defined contribution scheme.
Example 9: Defined benefit plan.
Example 10: Calculating the net defined benefit asset/liability.
Example 11: Calculating the net defined benefit asset/liability.
Example 12: Non-vesting conditions.
Example 13: Projected unit credit method.
Example 18: Other long term employee benefits.
Example 19: Termination benefits – Forced and voluntary redundancy.
Example 20: Recognising deferred tax.
Example 22: Extract from notes to the financial statements.
Example 23: Extract from the accounting policy notes and notes to the financial statements.
Example 24: Extract from the notes to the financial statements.
Example 26: Extract from notes to the financial statements.
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