Chapter 19 - problems

Question 1

19 -3 - IFRS

(b) Prepare a continuity schedule of the projected benefit obligation over the three-year period.

Answer 1

DBO:

+ past service cost

+ current service cost

+ interest expense (on the beginning balance which will include PAST SERVICE COSTS, if incurred)

+/- actuarial loss/gain

_- (benefits paid out) _

Ending balance

Question 2

19 - 3 - IFRS

(c) Prepare a continuity schedule of the plan assets over the three-year period.

Answer 2

Plan Assets (b/b)

+ actual return on plan assets

+ contributions

_- (benefits paid out) _

= ending balance

Question 3

19-3 - IFRS

(d) Determine the pension expense for 2014…

Answer 3

+ Current service cost

+ past service cost (expensed immediately if any)

+ interest on DBO

• (expected return on Plan Assets)

* ASPE deducts the actual return on Plan Assets

Question 4

19-3 (e)

Prepare the journal entries to reflect the pension plan transactions and events for each year.

Answer 4

1. Dr ‘Current service expense’ as you calculated in (d)
   * dr/cr Remeasurment (Gain) Loss - OCI **

.cr. Net Defined Benefit Liability/Asset

* Expected return - Actual return on plan Assets

• if Expected is higher than the Actual is a debit, if Expected is smaller that the Actual is a credit => add actuarial losses, subtract actuarial gains
  2. dr Net Defined Benefit Liability/Asset
  cr. Cash - for the amount we actually paid out.

* if there is no difference between the expected and actual return, then nothing goes into OCI

Question 5

19-3 (g)

Determine the pension expense for each of 2014, 2015, and 2016 assuming that the company elects to apply the immediate recognition approach under ASPE.

Answer 5

+ current service cost

+ past service costs (if any)

+ interest on DBO

• (ACTUAL return on assets)

_+ actuarial loss (if any) _

= pension expense

Question 6

IFRS vs ASPE - Pension expense

Answer 6

1. ASPE:
   - you subtract ACTUAL return on Assets (not expected)
   - you add Actuarial loss => expensed right away through net income as opposed to OCI like in IFRS
2. IFRS
   - you subtract the EXPECTED return on Assets
   - the difference between EXPECTED and ACTUAL and any actuarial loss/gain goes into OCI => see the journal entry = 19-3 (e)

Question 7

19-4

Defined benefit obl igation, opening balance, funded basis
Defined benefit obl igation, opening balance, accounting basis

Answer 7

Calculate everything for the accounting basis

Question 8

19-4

the amount reported on the B/S

Answer 8

= Net Defined benefit (liability)/asset

which is the difference between the (DBO) and Plan Assets at fair value (Memo accounts)