Postemployment Benefits PDF

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Summary

POSTEMPLOYMENT BENEFITSEmployee Benefits are: a. All forms of consideration (cash or non-cash) given by an entity in exchange for service rendered by employees or for the termination of employment. b. Benefits that are payable after the completion of employment. PE c. Benefits that are expected to b...

Description

POSTEMPLOYMENT BENEFITS Employee Benefits are: a. All forms of consideration (cash or non-cash) given by an entity in exchange for service rendered by employees or for the termination of employment. b. Benefits that are payable after the completion of employment. PE c. Benefits that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service. ST d. Benefits other than short-term employee benefits, post employment benefits and termination benefits. OLT Note: Accounting for employee benefits is heavily on the type of benefit. Type of Employee Benefits: 1. Post-employment (PE) ● Payable after completion of employment. ● Usually part of the remuneration package (total offering of the entity to the employee). 2. Short-term (ST) 3. Other long term (OLT) 4. Termination Post-employment Benefits a. Classification ● Defined Contribution Plan ● Defined Benefit Plan b.

It may be ● contributory or noncontributory Contributory

Noncontributory

Both employee and employer make contributions but they do not necessarily contribute equal amounts. ●

Only the employer.

Funded or unfunded Funded Plan

Unfunded Plan

Entity sets aside funds for future retirement benefits.

Entity retains the obligation . No establishment of separate fund.

Defined Contribution Plan vs Defined Benefit Plan Defined Contribution Plan Actuarial and investment risks fall to employees.

Defined Benefit Plan Actuarial and investment risks fall to the employer

(entity). Accounting: straightforward

Accounting: complex

No actual Assumptions

Requires actuarial assumptions

No actual gains and losses

Possibility of actuarial gains and losses

Normally, undiscounted

Normally, discounted

Expense (P/L): Required contribution

Expense (P/L and OCI): S- service I-interest R- remeasurement

SFP: Not yet paid- accrued Overpayment- prepaid (if it will lead to a reduction in future payments or a cash refund)

Defined Contribution Plan - Contribution: Definite - Benefit: Indefinite - Trustee determines the retirement benefit. Defined Benefit Plan - Contribution: Indefinite - Benefit: Definite

SFP: Underfunded- deficit (accrued) Overfunded- surplus (prepaid)

the insurer does not pay all future employee benefits. Defined Benefit Plan Components of Defined Benefit Cost (PAS 19, paragraph 120) 1.

Service cost (Profit or loss) a. Current service cost b. Past service cost c. Any gain or loss on settlement

2.

Interest (net) (Profit or loss) a. Defined Benefit Obligation b. Plan assets c. Effect of asset ceiling

3.

Remeasurements (OCI) subsequently transferred within equity or reclassified to retained earnings a. Plan assets b. Projected benefit obligation c. Effect of asset ceiling

Postemployment benefit plans under the law a. Social Security System - defined contribution plan - Percentage of salary b. -

R.A. 7641 Defined benefit plan

c. -

Insured benefits Defined contribution plan However, it shall be accounted for as a defined benefit plan if: ● To pay the employee benefits directly when they fall due. ● To pay further amounts if...