tenSAI notes

QUICK NOTES
Annual Benefit under Accumulated Benefit Obligation = disregard any future increase in salary
Annual Benefit under Projected Benefit Obligation = consider future increase in salary
Current Service Cost (paid ON the year of retirement) = Annual Benefit for one year of service x PV of 1 (each year
before retirement)
Current Service Cost (paid AFTER the year of retirement) = Annual Benefit for one year of service x PV of ordinary annuity of
1 x PV of 1 (each year before retirement)
Present Value of Benefit Obligation:
Benefits Earned
(Annual Benefit x years of
service x %%)

PV of ordinary annuity of 1 for X

years
(X= no. of years to be receiving
benefits)

PV of 1 for X years
(X = no. of years from current year to
retirement year)

Prepaid/Accrued Benefit Cost = Fair Value of Plan Assets - Projected Benefit Obligation
FVPA>PBO the difference is a Prepaid
o If Prepaid Benefit Cost>Asset Ceiling the difference is Effect of Asset Ceiling (may be beginning or ending)
o If not, then ignore the asset ceiling
FVPA<PBO the difference is a Accrued
Change in Effect of Asset Ceiling:
Effect of Asset Ceiling Ending> Effect of Asset Ceiling Beginning the difference is a LOSS
Effect of Asset Ceiling Ending<Effect of Asset Ceiling Beginning the difference is a GAIN
FVPA & PBO is only shown in a memorandum entry
Prepaid/Accrued Benefit Cost is a noncurrent item

EBE
PBO
FVPA
RG/R
L

Employee Benefit Expense

Projected Benefit Obligation
Fair Value of Plan Assets
Remeasurement Gain /
Remeasurement Loss

tenSAI notes

tenSAI notes
POSTEMPLOYMENT BENEFITS (PAS 19 Revise / 19R)
Defined Contribution Plan (DCP)
The entity pays fixed contributions into a separate entity known as fund
Contribution is definite but the Benefit is indefinite
A trustee will administer, manage and invest the funds
The accumulated fund in the hands of the trustee determines the retiring
employees benefit
Employee bears the risk in a defined contribution plan
Defined Benefit Plan (DBP)
The entity provides the agreed benefits to employees
Benefit is definite but the Contribution is indefinite
The entity will make contributions such that it would be enough to cover the
agreed benefits
Entity bears the risk in a defined contribution plan
Multiemployer Plan
This is a DCP or DBP that pools the assets contributed by various entities that
are not under common control and uses those assets to provide benefits to
employees of more than one entity.
Examples of Postemployment benefits under the LAW
Social Security System - defined contribution plan
Retirement Pay Law or R.A. 7641 - defined benefit plan
Insured benefits
DBP if there is a legal or constructive obligation to:
o Pay the employee benefits directly when they fall due
o Pay further amounts if the insurer does not pay the benefits
DCP if otherwise.
Accounting for Defined Contribution Plan
Paid Contribution:
Employee Benefit Expense
xx
Cash
xx

Unpaid Contribution:
Employee Benefit Expense
Accrued Benefit Payable

Prepaid:
Prepaid Benefit Expense xx

xx
xx

tenSAI notes
Cash
xx
Accounting for Defined Benefit Plan
Current Service Cost
Past Service Cost
Employee
Benefit Expense
Interest expense on effect of asset ceiling
1
Total Service
Gain or Loss on Settlement
Costs
Interest Expense (Discount Rate x Projected Benefit
Net Interest

Obligation)

Interest Income (Discount Rate x Fair Value of Plant

Assets)
2

Actuarial Gain or Loss

Remeasurement
s (OCI)

(PBO Actual - PBO Estimate =

(Gain)/Loss)

Remeasurements

Remeasurement gain or (loss) on plan assets

Remeasurement gain or (loss)on change in the
asset ceiling
4

ADD
SUBTRACT
ADD if GAIN / DEDUCT if LOSS
1
2

Settlement Price - PV of defined benefit obligation = Gain / (Loss)

PBO Actual - PBO Estimate = (Gain) / Loss (there is a gain if the answer is negative because

this is a liability)
3

Actual Return on Plan Assets - Interest income on FVPA = Gain / Loss on plan
assets
4
Change in the effect of asset ceiling - Interest expense on effect of asset ceiling
beginning = Gain / (Loss)
4
Change in the effect of asset ceiling = Asset ceiling ending - Asset ceiling
beginning