BALIUAG UNIVERSITY

Integrated Accounting Course II

Summer 2017

MODULE 11: Employee Benefits LVC

 RELATED STANDARDS: IAS 19 – Employee Benefits; IAS 26 – Accounting and Reporting by Retirement Benefit Plans; IFRIC 14 –
The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

 Definition of Terms
I. IAS 19 - Definitions of employee benefits
Employee benefits - All forms of consideration given by an entity in exchange for service rendered by employees or for the
termination of employment.
Other long-term employee benefits - All employee benefits other than short-term employee benefits, post-employment
benefits and termination benefits.
Post-employment benefits - Employee benefits (other than termination benefits and short-term employee benefits) that are
payable after the completion of employment.
Short-term employee benefits - Employee benefits (other than termination 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.
Termination benefits - Employee benefits provided in exchange for the termination of an employee’s employment as a result of
either:
(a) an entity’s decision to terminate an employee’s employment before the normal retirement date; or
(b) an employee’s decision to accept an offer of benefits in exchange for the termination of employment.
II. IAS 19 – Definitions relating to classification of plans
Defined benefit plans - Post-employment benefit plans other than defined contribution plans.
Defined contribution plans - Post-employment benefit plans under which an entity pays fixed contributions into a separate
entity (a fund) and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient
assets to pay all employee benefits relating to employee service in the current and prior periods.
Multi-employer plans - Defined contribution plans (other than state plans) or defined benefit plans (other than state plans)
that (a) pool the assets contributed by various entities that are not under common control; and
(b) use those assets to provide benefits to employees of more than one entity, on the basis that contribution and benefit levels
are determined without regard to the identity of the entity that employs the employees.
Post-employment benefit plans - Formal or informal arrangements under which an entity provides post-employment benefits
for one or more employees.
III. Definitions relating to the net defined benefit liability (asset)
Asset ceiling - The present value of any economic benefits available in the form of refunds from the plan or reductions in future
contributions to the plan.
Assets held by a long-term employee benefit fund - Assets (other than non-transferable financial instruments issued by the
reporting entity) that: (a) are held by an entity (a fund) that is legally separate from the reporting entity and exists solely to pay
or fund employee benefits; and (b) are available to be used only to pay or fund employee benefits, are not available to the
reporting entity’s own creditors (even in bankruptcy), and cannot be returned to the reporting entity, unless either:
(i) the remaining assets of the fund are sufficient to meet all the related employee benefit obligations of the plan or the
reporting entity; or
(ii) the assets are returned to the reporting entity to reimburse it for employee benefits already paid.
Deficit or surplus – It is (a) the present value of the defined benefit obligation less (b) the fair value of plan assets (if any).
Net defined benefit liability (asset) - The deficit or surplus, adjusted for any effect of limiting a net defined benefit asset to the
asset ceiling.
Plan assets – These comprise: (a) assets held by a long-term employee benefit fund; and (b) qualifying insurance policies.
Present value of a defined benefit obligation - The present value, without deducting any plan assets, of expected future
payments required to settle the obligation resulting from employee service in the current and prior periods.
Qualifying insurance policy - An insurance policy1 issued by an insurer that is not a related party of the reporting entity, if the
proceeds of the policy: (a) can be used only to pay or fund employee benefits under a defined benefit plan; and (b) are not
available to the reporting entity’s own creditors (even in bankruptcy) and cannot be paid to the reporting entity, unless either:
(i) the proceeds represent surplus assets that are not needed for the policy to meet all the related employee benefit
obligations; or
(ii) the proceeds are returned to the reporting entity to reimburse it for employee benefits already paid.
IV. IAS 26
Actuarial present value of promised retirement benefits - The present value of the expected payments by a retirement benefit
plan to existing and past employees, attributable to the service already rendered.
Defined benefit plans - Retirement benefit plans under which amounts to be paid as retirement benefits are determined by
reference to a formula usually based on employees’ earnings and/or years of service.
Defined contribution plans - Retirement benefit plans under which amounts to be paid as retirement benefits are determined
by contributions to a fund together with investment earnings thereon.

Module 11 Page 1 of 8
Employee Benefits LVC
Funding - The transfer of assets to an entity (the fund ) separate from the employer’s entity to meet future obligations for the
payment of retirement benefits.
Net assets available for benefits - The assets of a plan less liabilities other than the actuarial present value of promised
retirement benefits.
Retirement benefit plans - Arrangements whereby an entity provides benefits for employees on or after termination of service
(either in the form of an annual income or as a lump sum) when such benefits, or the contributions towards them, can be
determined or estimated in advance of retirement from the provisions of a document or from the entity’s practices.
Vested benefits - Benefits, the rights to which, under the conditions of a retirement benefit plan, are not conditional on
continued employment.

I. IAS 19 – Employee Benefits

 Classification of employee benefits
1. Short-term employee benefits
2. Termination benefits
3. Other long-term employee benefits
4. Post-employment benefits
 Short-term employee benefits
 Short-term employee benefits include:
a. Wages, salaries and social security contributions
b. Paid annual leave and paid sick leave
c. Profit-sharing and bonuses
d. Non-monetary benefits (such as medical care, housing, cars and free or subsidized goods or services) for current
employees.
 Recognition and measurement
 When an employee has rendered service to an entity during an accounting period, the entity shall recognize the
undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.
 Accounting treatment:
a. As a liability (accrued expense), after deducting any amount already paid. If the amount already paid exceeds the
undiscounted amount of the benefits, an entity shall recognize that excess as an asset (prepaid expense) (to the
extent that the prepayment will lead to a reduction in future payments or a cash refund).
b. As an expense, unless another IFRS requires or permits the inclusion of the benefits in the cost of an asset (i.e.
example, IAS 2 IAS 16).
 Short-term paid absences
 An entity shall recognize the expected cost of short-term employee benefits in the form of paid absences as follows:
a. Accumulating paid absences
 Accumulating paid absences are those that are carried forward and can be used in future periods if the current
period’s entitlement is not used in full.
 Accumulating paid absences may be either be:
i. Vesting – Employees are entitled to a cash payment for unused entitlement on leaving the entity.
ii. Non-vesting – When employees are not entitled to a cash payment for unused entitlement on leaving the
entity.
 An entity shall measure the expected cost of accumulating paid absences as the additional amount that the
entity expects to pay as a result of the unused entitlement that has accumulated at the end of the reporting
period.
b. Non-accumulating paid absences
 Do not carry forward; they lapse if the current period’s entitlement is not used in full and do not entitle
employees to a cash payment for unused entitlement on leaving the entity.
 An entity recognizes no liability or expense until the time of the absence, because employee service does not
increase the amount of the benefit.
 Profit-sharing and bonus plans
 An entity shall recognize the expected cost of profit-sharing and bonus payments when, and only when:
a. The entity has a present legal or constructive obligation to make such payments as a result of past events; and
b. A reliable estimate of the obligation can be made.
 Under some profit-sharing plans, employees receive a share of the profit only if they remain with the entity for a
specified period.
 Such plans create a constructive obligation as employees render service that increases the amount to be paid if they
remain in service until the end of the specified period.
 The measurement of such constructive obligations reflects the possibility that some employees may leave without
receiving profit-sharing payment.
 Termination benefits
 A termination benefit liability is recognized at the earlier of the following dates:
a. When the entity can no longer withdraw the offer of those benefits
b. When the entity recognizes costs for a restructuring under IAS 37 which involves the payment of termination benefits.
 Termination benefits are measured in accordance with the nature of employee benefit, i.e. as an enhancement of other
post-employment benefits, or otherwise as a short-term employee benefit or other long-term employee benefit.
Module 11 Page 2 of 8
Employee Benefits LVC

 Other long-term benefits

 IAS 19 prescribes a modified application of the post-employment benefit model described for other long-term employee
benefits.
 The recognition and measurement of a surplus or deficit in another long-term employee benefit plan is consistent with the
requirements outlined in IAS 19.
 Service cost, net interest and remeasurements are all recognized in profit or loss (unless recognized in the cost of an asset
under another IFRS), i.e. when compared to accounting for defined benefit plans, the effects of remeasurements are not
recognized in other comprehensive income.
 Post-employment benefits
 Post-employment benefits are formal or informal arrangements.
 Post-employment benefits include items such as the following:
 Retirement benefits (e.g. pensions and lump sum payments on retirement)
 Other post-employment benefits, such as post-employment life insurance and post-employment medical care.
 Classification of post-employment benefit plans
1. Defined contribution plans (i.e. SSS, GSIS)
2. Defined benefit plans (i.e. R.A. 7641)
3. Multi-employer plans
 Accounting for defined contribution plans
 Recognition and measurement
When an employee has rendered service to an entity during a period, the entity shall recognize the contribution
payable to a defined contribution plan in exchange for that service:
1. As a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid
exceeds the contribution due for service before the end of the reporting period, an entity shall recognize that
excess as an asset (prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in
future payments or a cash refund.
2. As an expense, unless another IFRS requires or permits the inclusion of the contribution in the cost of an asset
(for example, IAS 2 and IAS 16).
 When contributions to a defined contribution plan are not expected to be settled wholly before twelve months after
the end of the annual reporting period in which the employees render the related service, they shall be discounted
using the discount rate.
 An entity shall disclose the amount recognized as an expense for defined contribution plans.
 Accounting for defined benefit plans
 Defined benefit plans may be unfunded, or they may be wholly or partly funded by contributions by an entity, and
sometimes its employees, into an entity, or fund, that is legally separate from the reporting entity and from which
the employee benefits are paid.
 The entity is, in substance, underwriting the actuarial and investment risks associated with the plan. Consequently,
the expense recognized for a defined benefit plan is not necessarily the amount of the contribution due for the
period.
 Steps in accounting by an entity for defined benefit plans
A. Determining the deficit or surplus. This involves:
i. Using an actuarial technique, the projected unit credit method, to make a reliable estimate of the ultimate cost to
the entity of the benefit that employees have earned in return for their service in the current and prior periods.
ii. Discounting that benefit in order to determine the present value of the defined benefit obligation and the current
service cost.
iii. Deducting the fair value of any plan assets from the present value of the defined benefit obligation.
B. Determining the amount of the net defined benefit liability (asset) as the amount of the deficit or surplus determined
in adjusted for any effect of limiting a net defined benefit asset to the asset ceiling.
C. Determining amounts to be recognized in profit or loss.
D. Determining the remeasurements of the net defined benefit liability (asset), to be recognized in other
comprehensive income.
 Summary of defined benefit costs
Employee Benefit Expense in P/L Remeasurements in OCI
a. Service cost (past and current) a. Actuarial gains and losses
b. Settlement gain/loss b. Return on plan assets, excluding amounts included in net interest.
c. Net interest (interest expense net of c. Any change in the effect of the asset ceiling, excluding amounts
interest income included in net interest.

 Present value of defined benefit obligations and current service cost

 Measurement of present value
a. Apply an actuarial valuation method
b. Attribute benefit to periods of service
c. Make actuarial assumptions
 Actuarial valuation method

Module 11 Page 3 of 8
Employee Benefits LVC
- An entity shall use the projected unit credit method to determine the present value of its defined benefit
obligations and the related current service cost and, where applicable, past service cost.
- The projected unit credit method (sometimes known as the accrued benefit method pro-rated on service or as
the benefit/years of service method) sees each period of service as giving rise to an additional unit of benefit
entitlement and measures each unit separately to build up the final obligation.
- This Standard encourages, but does not require, an entity to involve a qualified actuary in the measurement of
all material post-employment benefit obligations.
 Other considerations in accounting for defined benefit plan
 Past service cost is the change in the present value of the defined benefit obligation resulting from a plan
amendment or curtailment.
 Gains and losses on settlement is the difference between the present value of the defined benefit obligation
being settled and the settlement price, including any plan assets transferred and any payments made directly by
the entity in connection with the settlement.
 The fair value of any plan assets is deducted from the present value of the defined benefit obligation in
determining the deficit or surplus.
 Remeasurements of the net defined benefit liability (asset) recognized in other comprehensive income shall not
be reclassified to profit or loss in a subsequent period. However, the entity may transfer those amounts
recognized in other comprehensive income within equity.
 Net interest on the net defined benefit liability (asset) shall be determined by multiplying the net defined benefit
liability (asset) by the discount rate, both as determined at the start of the annual reporting period, taking
account of any changes in the net defined benefit liability (asset) during the period as a result of contribution
and benefit payments.

 Computations Related to Plan Assets and Benefit Obligation

Fair value of plan assets (FVPA) xx PBO, beg. xx
Projected benefit obligation (PBO) (xx) Current service cost xx
Prepaid/(Accrued) benefit costs xx Past service cost xx
FVPA, beg. xx Interest expense xx
Contribution to the plan xx Actuarial loss/(gain) xx
Actual return/(loss) on plan assets xx Benefits paid* (xx)
Benefits paid* (xx) PBO, end. xx
FVPA, end. xx
*Benefits paid = Settlement price on defined benefit obligation *Benefits paid = PV of defined benefit obligation settled

 Computations Related to Defined Benefit Costs (P/L and OCI)

Computations Related to Defined Benefit Costs (P/L and OCI)
Current service cost xx Remeasurement gain/loss – plan assets xx
Past service cost xx Actuarial gain/loss xx
Interest expense on PBO xx Net remeasurement gain/loss – OCI xx
Interest income on FVPA (xx) Actual return/loss on plan assets xx
Settlement loss/(gain) xx Interest income of FVPA (xx)
Employee benefit expense xx Remeasurement gain/(loss) – plan assets xx
Interest expense = PBO, beg. x Discount rate PBO – actual xx
PBO – estimated (xx)
Interest income = FVPA, be. x Discount rate
Actuarial (gain)/loss‡ xx
PV of defined benefit obligation settled xx Employee benefit expense xx
Settlement price on benefit obligation (xx) Net remeasurement loss/(gain) – OCI xx
Settlement gain/(loss) xx Total/Net defined benefit costs xx

 Asset ceiling
 IAS 16 provides that the surplus in a defined benefit plan must not exceed the asset ceiling determined by using the discount
rate in the measurement of the defined benefit obligation.
 Interest expense on effects of asset ceiling is included in the computation of employee benefit expense

 Illustration: Accounting for defined benefit plan

Fair value of plan assets, Jan. 1 P 6,000,000
Projected benefit obligation, Jan. 1 5,800,000
Actuarial gain on defined benefit obligation 100,000
Actual return on plan assets 700,000
Contribution to plan assets 600,000
Past service cost on defined benefit obligation 300,000
Current service cost on defined benefit obligation 800,000
Present value of defined benefit obligation 500,000
Settlement price of defined benefit obligation 550,000
Discount rate 12%

Module 11 Page 4 of 8
Employee Benefits LVC
Requirements:
1. Interest expense
2. Interest income
3. Settlement gain/loss
4. Employee benefit expense
5. Remeasurement gain/loss on plan assets
6. Net remeasurement gain/loss – OCI
7. Total/Net benefit costs
8. Fair value of plan assets, Dec. 31
9. Projected benefit obligation, Dec. 31
10. Prepaid/Accrued benefit cost, Jan. 1
11. Prepaid/Accrued benefit cost, Dec. 1
12. Journal entry to reconcile the computations

II. IAS 26 - Accounting and Reporting by Retirement Benefit Plans

 Objective of IAS 26
The objective of IAS 26 is to specify measurement and disclosure principles for the reports of retirement benefit plans. All plans
should include in their reports a statement of changes in net assets available for benefits, a summary of significant accounting
policies and a description of the plan and the effect of any changes in the plan during the period.
 Defined contribution plans
The report of a defined contribution plan should contain a statement of net assets available for benefits and a description of the
funding policy.
 Defined benefit plans
 The report of a defined benefit plan should contain either:
a. a statement that shows the net assets available for benefits, the actuarial present value of promised retirement
benefits (distinguishing between vested benefits and non-vested benefits) and the resulting excess or deficit; or
b. a statement of net assets available for benefits, including either a note disclosing the actuarial present value of
promised retirement benefits (distinguishing between vested benefits and non-vested benefits) or a reference to
this information in an accompanying actuarial report.
 Other considerations
 If an actuarial valuation has not been prepared at the date of the report of a defined benefit plan, the most recent
valuation should be used as a base and the date of the valuation disclosed.
 The actuarial present value of promised retirement benefits should be based on the benefits promised under the terms of
the plan on service rendered to date, using either current salary levels or projected salary levels, with disclosure of the
basis used. The effect of any changes in actuarial assumptions that have had a significant effect on the actuarial present
value of promised retirement benefits should also be disclosed.
 Retirement benefit plan investments should be carried at fair value. For marketable securities, fair value means market
value. If fair values cannot be estimated for certain retirement benefit plan investments, disclosure should be made of
the reason why fair value is not used.

********************************************************
Illustrative Problems

1. Defined by IAS 19 as all forms of consideration given by an entity in exchange for service rendered by employees or for
the termination of employment.
A. Employee benefits C. Short-term employee benefits
B. Post-employment benefits D. Termination benefits
2. Defined by IAS 19 as employee benefits provided in exchange for the termination of an employee’s employment as a
result of an entity’s decision to terminate an employee’s employment before the normal retirement date; or an
employee’s decision to accept an offer of benefits in exchange for the termination of employment.
A. Employee benefits C. Short-term employee benefits
B. Post-employment benefits D. Termination benefits
3. Defined by IAS 19 as assets which comprise those assets held by a long-term employee benefit fund and qualifying
insurance policies.
A. Assets ceiling C. Plan assets
B. Deficit or surplus D. Net defined benefit assets
4. Defined by IAS 19 as the present value of any economic benefits available in the form of refunds from the plan or
reductions in future contributions to the plan.
A. Present value of a defined benefit obligation C. Fair value of a defined benefit obligation
B. Assets ceiling D. Deficit or surplus
5. Defined by IAS 19 as post-employment benefit plans under which an entity pays fixed contributions into a separate entity
(a fund) and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient
assets to pay all employee benefits relating to employee service in the current and prior periods.
A. Defined benefit plans C. Multi-employer plans
B. Defined contribution plans D. Retirement benefit plans
Module 11 Page 5 of 8
Employee Benefits LVC
6. Defined by IAS 19 as post-employment benefit plans that pool the assets contributed by various entities that are not
under common control; and use those assets to provide benefits to employees of more than one entity, on the basis that
contribution and benefit levels are determined without regard to the identity of the entity that employs the employees.
A. Defined benefit plans C. Multi-employer plans
A. Defined contribution plans D. Retirement benefit plans
7. Defined by IAS 26 as benefits, the rights to which, under the conditions of a retirement benefit plan, are not conditional
on continued employment.
A. Retirement benefits C. Funding
B. Defined benefits D. Vested benefits
8. Defined by IAS 26 as arrangements whereby an entity provides benefits for employees on or after termination of service
(either in the form of an annual income or as a lump sum) when such benefits, or the contributions towards them, can be
determined or estimated in advance of retirement from the provisions of a document or from the entity’s practices.
A. Retirement benefits C. Funding
B. Defined benefits D. Vested benefits
9. Which of the following employee benefits is outside the scope of IAS 19?
A. Short-term employee benefits C. Share-based payment benefits
B. Post-employment benefits D. Termination benefits
10. Short-term employee benefits include
A. Wages and salaries C. Non-monetary benefits
B. Profit-sharing and bonuses D. All of the foregoing
11. Accumulating paid absences (Choose the incorrect one).
A. An entity recognizes no liability or expense until the time of the absence, because employee service does not
increase the amount of the benefit.
B. Accumulating paid absences are those that are carried forward and can be used in future periods if the current
period’s entitlement is not used in full.
C. Accumulating paid absences may be either be vesting or non-vesting.
D. An entity shall measure the expected cost of accumulating paid absences as the additional amount that the entity
expects to pay as a result of the unused entitlement that has accumulated at the end of the reporting period.
12. Under defined contribution plans, actuarial risk and investment risk fall, in substance, on the
A. Entity C. Either A or B
B. Employee D. Neither A nor B
13. Under defined contribution plans, if the contribution already paid exceeds the contribution due for service before the end
of the reporting period, an entity shall recognize that excess as _____________ to the extent that the prepayment will
lead to, for example, a reduction in future payments or a cash refund.
A. Prepaid expense C. Accrued expense
B. Loss – profit and loss D. Loss – OCI
14. Defined benefit plans (Choose the incorrect one.)
A. The entity is, in substance, underwriting the actuarial and investment risks associated with the plan.
B. Consequently, the expense recognized for a defined benefit plan is not necessarily the amount of the contribution
due for the period.
C. Defined benefit plans may be unfunded, or they may be wholly or partly funded by contributions by an entity, and
sometimes its employees, into an entity, or fund.
D. None of the foregoing.
15. The actuarial technique to determine the present value of its defined benefit obligations and the related current service
cost and, where applicable, past service cost.
A. Corridor method C. Expected value method
B. Projected unit credit method D. Regression analysis method
16. Amounts under post-employment benefits to be recognized in profit or loss, except
A. Current service cost
B. Net interest on the net defined benefit liability (asset)
C. Any change in the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit
liability (asset).
D. Past service cost
17. Amounts under post-employment benefits to be recognized in other comprehensive income
A. Gain or loss on settlement C. Both A and B
B. Actuarial gains and losses D. Neither A nor B
18. When an entity has a surplus in a defined benefit plan, it shall measure the net defined benefit asset at
A. The surplus in the defined benefit plan
B. The asset ceiling, determined using the discount rate in post-employment benefits.
C. Lower between A and B.
D. Higher between A and B
19. Which of the following statements is incorrect regarding actuary as used in defined benefit plan?
A. The projected unit credit method sees each period of service as giving rise to an additional unit of benefit
entitlement and measures each unit separately to build up the final obligation.
B. An entity shall determine its mortality assumptions by reference to its best estimate of the mortality of plan
members both during and after employment.

Module 11 Page 6 of 8
Employee Benefits LVC
C. The rate used to discount post-employment benefit obligations (both funded and unfunded) shall be determined by
reference to market yields at the end of the reporting period on high quality corporate bonds.
D. IAS 19 requires an entity to involve a qualified actuary in the measurement of all material post-employment benefit
obligations.
20. If an employee’s service in later years will lead to a materially higher level of benefit than in earlier years, an entity shall
attribute benefit
A. On a straight-line basis C. Lower between A and B
B. Using the plan’s benefit formula D. Higher between A and B
21. The change in the present value of the defined benefit obligation resulting from a plan amendment or curtailment.
A. Current service cost C. Gains and losses on settlement
B. Past service cost D. Fair value of plan assets
22. The difference between the present value of the defined benefit obligation being settled, as determined on the date of
settlement; and the settlement price, including any plan assets transferred and any payments made directly by the entity
in connection with the settlement.
A. Current service cost C. Gains and losses on settlement
B. Past service cost D. Fair value of plan assets
23. It is deducted from the present value of the defined benefit obligation in determining the deficit or surplus.
A. Current service cost C. Gains and losses on settlement
B. Past service cost D. Fair value of plan assets
24. The components of defined benefits cost do not include
A. Service cost
B. net interest on the net defined benefit liability (asset)
C. Remeasurements of the net defined benefit liability (asset))
D. Annual contribution to the fund
25. Remeasurements of the net defined benefit liability (asset) recognized in other comprehensive income
A. Shall be reclassified to profit or loss in a subsequent period
B. The entity may transfer those amounts recognized in other comprehensive income within equity
C. May be transferred to asset or liability account.
D. None of the foregoing.
26. This shall be determined by multiplying the net defined benefit liability (asset) by the discount rate
A. Net interest C. Gains and losses on settlement
B. Net asset D. Remeasurements
27. For long-term benefits, the following are recognized in profit or loss, except
A. Net interest C. Remeasurements
B. Service cost D. None of the foregoing
28. Under IAS 26, if an actuarial valuation has not been prepared at the date of the report of a defined benefit plan:
A. The most recent valuation should be used as a base and the date of the valuation disclosed.
B. Actuarial valuation should be used as a base and the date of the valuation disclosed.
C. Fair market valuation should be used and the actuarial valuation disclosed.
D. All the choices are correct.
29. Retirement benefit plan investments should be carried at
A. Present value C. Future value
B. Fair value D. Net realizable value
30. During the first year of the entity’s existence, employees earned accumulating vacation leave as follows:
Employee Ave. wage per day Vacation leave earned Vacation leave taken
Alma 400 10 10
Lorna 600 15 10
Fe 800 20 5
What amount should be recognized as expense from vacation leave during the first year?
A. 29,000 C. 15,000
B. 14,000 D. 19,000
31. Refer to the preceding problem. What should be reported as accrued vacation pay at year end?
A. 29,000 C. 15,000
B. 14,000 D. 19,000
32. A profit sharing bonus plan requires an entity to pay 10% of net income before bonus and tax to employees who served
throughout the current year and will continue to serve the following year. The entity reported P20 million net income
before tax and tax. The entity expects to save 5% of the maximum bonus through staff turnover. What should be the
bonus expense for the year?
A. 2,000,000 C. 1,900,000
B. 1,000,000 D. 1,800,000
33. A company provided the following information for the current year:
Current service cost 1,300,000
Actual return on plant assets 600,000
Interest expense-PBO 550,000
Interest income on plan assets 500,000
Loss on plan settlement 250,000

Module 11 Page 7 of 8
Employee Benefits LVC
Past service cost during the year 400,000
Actuarial gain during the year 200,000
What is the defined benefit expense for the current year?
A. 1,700,000 C. 2,300,000
B. 2,000,000 D. 1,900,000
34. Refer to the preceding problem. What is the net remeasurement gain – OCI?
A. 100,000 C. 300,000
B. 200,000 D. 400,000
35. On January 01, Year 1, a company reported the following information about its defined benefit plan:
Fair value of plan assets (FVPA) 7,000,000
Projected benefit obligation (PBO) 7,500,000
Current service cost 1,400,000
Contribution to the plan 1,200,000
Actual return on plan assets 840,000
Decrease in PBO due to actuarial assumptions 200,000
Present value of defined benefit obligation settled 2,000,000
Settlement price of defined benefit obligation 1,900,000
Discount rate 10%
What should be the employee benefit expense to be reported in the statement of income?
A. 2,150,000 C. 1,350,000
B. 2,050,000 D. 1,450,000
36. Refer to the preceding problem. What should be the net remeasurement gain or loss – OCI for the year?
A. 140,000 gain C. 340,000 gain
B. 140,000 loss D. 60,000 loss
37. Refer to the preceding problem. What should be the FVPA on December 31, Year 1?
A. 7,140,000 C. 8,200,000
B. 7,540,000 D. 7,000,000
38. Refer to the preceding problem. What should be the PBO on December 31, Year 1?
A. 7,950,000 C. 7,650,000
B. 7,450,000 D. 9,650,000
39. Refer to the preceding problem. What is the balance of the prepaid/accrued benefit cost on December 31, Year 1?
A. 310,000 prepaid C. 650,000 prepaid
B. 310,000 accrued D. 650,000 accrued

- End of discussion –

"At the center of your being you have the answer; you know who you are and you know what you want." - Lao Tzu

Module 11 Page 8 of 8