Chapter 14 (Employee benefits)

Question 1

Which are the two types of pension plans?

Answer 1

BC (Benefit Company) och CE (Contribution Employee)

1. Defined contribution plans (employee bears the risk)
2. Defined benefit plans (company bears the risk)

Question 2

Which of the two pension plans will create a liability in the company and which will only create a cost in the income statement?

Answer 2

Defined benefit plans, where the company bears the risk, will create both

Question 3

What is a defined benefit obligation?

Answer 3

Estimates must be made of the accumulated benefits which employees have earned (obligation) and the extra amount they have earned during the current period

Question 4

Name two factors that are important in calculating the obligation

Answer 4

1. Employee mortality
2. Future salary increases
3. Future returns on investments
4. (Market) interest rates

Det som INTE verkar vara ett korrekt alternativ:

“expected return from equity and bonds”

Vilket är konstigt för det är ju synonymt med “future returns on investments”…

Question 5

In what way will the current market interest rate level impact the calculation of the
obligation?

Answer 5

The estimates of future obligations are discounted using the market interest rate

Question 6

The total cost for pensions during the period consists of two items (unless the
employees have contributed) - which?

Answer 6

1. The present value of current services cost for the period

2. The interest cost

Question 7

There are two objectives for IFRS2 Share based payments - which?

Answer 7

The objective of IFRS2 Share-based Payment is to prescribe the accounting treatment of payments made by an entity either:

1. In the form of shares (including share options), or
2. In cash, where the amount of cash payable depends upon the company’s share price

Question 8

What is the grant date and why is it important for the accounting when equity
instruments are involved?

Answer 8

The date when the fair value of equity instruments are measured and the value is fixed from that date

In the case of payments which take the form of equity instruments (i.e. shares or share options) the entity should measure the fair value of each equity instrument at the grant date

Question 9

What is a vesting condition and how does it affect the accounting?

Answer 9

The conditions the employee must satisfy to receive the equity instruments

Question 10

How is the accounting affected if the share-based payments are settled in cash?

Answer 10

The company should measure this liability at fair value, both at the grant date and at each reporting period

Any changes in this fair value during an accounting period are recognised in the calculation of the entity’s profit or loss for that period