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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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28.13 Plan introductions, changes, curtailments and settlements
28.13.1 Extract from FRS102: Section 28.21-28.21A
28.21 If a defined benefit plan has been introduced or the benefits have changed in the current period, the entity shall increase or decrease its net defined benefit liability to reflect the change, and shall recognise the increase (decrease) as an expense (income) in measuring profit or loss in the current reporting period.
28.21A If a defined benefit plan has been curtailed (ie benefits or group of covered employees are reduced) or settled (the relevant part of the employer’s obligation is completely discharged) in the current period, the defined benefit obligation shall be decreased or eliminated, and the entity shall recognise the resulting gain or loss in profit or loss in the current reporting period.
28.13.2 OmniPro comment
28.13.2.1 Definition of a settlement and the accounting treatment
A settlement occurs when the relevant part of the employer’s liability under the defined benefit plan is completely discharged. Examples when settlements could occur are when a defined benefit scheme is closed and the assets and liabilities are transferred into a defined contribution scheme.
If a settlement arises and it is irrevocable then the resulting gain/loss is recognised in the profit and loss account as per Section 28.21A of FRS 102. If on the other hand, the changes are not certain at the period end date then the gain/loss would be recognisd in other comprehensive income.
Example 14: Settlement
Prior to the year end a decision was made by the company to cease business 3 months after the year end. As part of negotiations the company agreed with the pension scheme trustees that the pension scheme would be closed and the fair value of the pensions would be determined by an actuary and transferred to a defined contribution scheme for the employees. The valuation showed that the difference between the carrying amount of the pension liability and the actual valuation performed that a gain of CU100,000 existed. As at year end the company had obtained agreement from all parties, this credit should be posted as a credit to the profit and loss account.
28.13.2.2 Definition of a curtailment and accounting treatment
A curtailment occurs when an entity makes a material reduction in the number of employees covered by a defined benefit plan or amends the plan terms so that a material element of the future service by current employees no longer qualify for benefits, or will qualify only for reduced benefits. It can result in a change to the plan rules due to a termination or suspension of a plan.
The gain or loss as a result of the curtailment should be recognised in the profit and loss account as stated in Section 28.21.A of FRS 102 but only when the entity is committed to the curtailment and certain it will be achieved. They do not necessarily have to have formal confirmation from the pension scheme trustees
Example 15: Curtailment
During the year the company agreed with the pension scheme trustees that going forward the pension payment to retired members would not increase in line with inflation (or no further benefits will accrue for future years of service). This has resulted in the liability decreasing by CU300,000. Given that the entity is irrevocably committed the CU300,000 credit should be recognised in the profit and loss account. If the change was not certain, then it would be recognised in other comprehensive income.
28.13.2.3 Plan changes
Where plan changes arise the impact is recognised in the profit and loss account immediately as per section 28.21 of FRS 102
Example 16: Plan changes
Company A operates a defined benefit scheme. During the year the company agreed to increase the pension whereby the percentage of final salary per year of service as a pension would increase from 1% to 2% for anyone who has in excess of 5 years of service.
An actuarial valuation indicates that this will result in additional liabilities for past service for members with over 5 years of CU100,000 and CU20,000 for members who have yet to reach the five year mark.
In this instance the full CU120,000 would have be recognised in the profit and loss as vested and non-vested rights must be included.
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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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