Employee Benefits Flashcards
Types of Employee Benefits (STOP)
Short-term
Termination
Other long-term
Post Employment
Short Term Employee Benefits
- since it is short term, it is expensed as incurred
- accumulating vs non accumulating
- vesting vs non vesting
Accumulative vs Non Accumulating
- Accumulative → carried forward
Vesting vs Non Vesting
- Vesting → both Used and Unused Entitlement
- Non Vesting → Used only (since non vesting, unused will be ignored)
Post Employment Benefits
- from the word itself, payable after employment
- defined contribution plan vs defined benefit plan
Defined Contribution Plan
- definite contribution
- variable benefit
- no actuarial assumption
Defined Benefit Plan
- variable contribution
- definite benefit
- with actuarial assumption (since benefit must be definite)
Defined Contribution Plan
- since no actuarial assumption, madali lang yung accounting
- Contribution = Expense
Actual Contribution more than Required Contribution
- Prepaid Expense
Vice Versa
- Accrued Expense
Defined Benefit Plan
- what are the 4 steps in computing?
- Projected Benefit Obligation
- Fair Value of Plan Assets
- Accrued / Prepaid Benefit
- Defined Benefit Cost
Step 1 : PROJECTED BENEFIT OBLIGATION
- PV of all benefits based on future compensation level
- Projected Unit Credit Method
- AGOSBP-BALSE
PBO is liab (Beg → Credit = BALSE)
Less : Actuarial Gain
Less : PV of Obligation Settled
Less : Benefits Paid
Beginning Balance
Actuarial Loss
Service Cost
Expense - Interest
Step 2 : FAIR VALUE OF PLAN ASSETS
- fund set aside for payment
- BARC-SBP
FVPA is asset (Beg → Debit = BARC)
Beginning Balance
Actual Return
Contributions
Less : Settlement Price
Less : Benefits Paid
Step 3 : ACCRUED / PREPAID BENEFIT
If PBO is higher = deficit (accrued benefit)
If FVPA is higher = surplus (prepaid benefit)
However, for surplus, you must choose the LOWER of
- surplus
- asset ceiling (ceiling → maximum)
Yes
Step 4 : DEFINED BENEFIT COST
- Employee Benefit Expense + Remeasurements (OCI)
How to compute Employee Benefit Expense?
Employee Benefit Expense
- Service Cost + Net Interest
Service Cost
- Current and Past Service Cost
- Settlement Price
- Less : PV of Obligation Settled
Net Interest
- Interest Expense
- Interest on Effect of Asset Ceiling (surplus less AC)
- Less : Interest Income
NOTE : All interests are based on beginning balances.
Step 4 : DEFINED BENEFIT COST
- Employee Benefit Expense + Remeasurements (OCI)
How to compute Remeasurements (ARAC)?
Remeasurements (OCI)
- Actuarial, Return, Asset Ceiling
Actuarial
- Gain → decrease in PBO
- Loss → increase in PBO
Return
- Gain → actual return greater than interest income
- Loss → actual return less than interest income
Effect of Asset Ceiling
- Gain → decrease in AC + interest expense
- Loss → increase in AC - interest expense
