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IAS 19Workpapers (Step 4 of 5)

Workpaper template

Step 4 of 5
WorkpaperIAS 19 — Employee BenefitsL3 · L4

Asset ceiling of a plan in surplus: availability of the benefits, minimum funding and effect in other comprehensive income

2 missions10 sections to document90 min
Prepared by
AI-assisted draft
Reviewed by
Not reviewed — human review required
Status
Published

Objective of the workpaper

Establish the surplus of the plan, determine whether the entity has an unconditional right to a refund or to a reduction in contributions, take the minimum funding requirements into account year by year and then in present value, and retain the lower of the surplus and the ceiling. An excess of the contributions required over the service cost reduces the benefit, which can never be negative. Amounts and schedules are case data; the intention of the entity creates no available benefit.

10 sections · 30 blocks · 8 calculations · 1 entry

  • IAS 19 §64

Work this workpaper as a mission

Each case that uses this template opens in the mission workspace: data, analysis, calculation, entries, conclusion and review, with your progress saved.

2 instances from the cases: the calculations and entries below are run by the calculation engine.

File and entity
Plan in surplus: asset ceiling, minimum funding, member contributions and disclosures
Case tasks documented here
  • Does the entity have an unconditional right to a refund or to a reduction in future contributions?
  • Compute, for each of the three years and then in present value, the difference between the minimum funding contribution for future service and the future service cost.
  • Determine the benefit available as a reduction in contributions, without it being below zero.
  • Determine the net asset to recognise.
  • Compute the effect of the ceiling.
  • Record the effect of the ceiling.
1

Facts and data

Inputs

  • Plan in surplus: assets, obligation and plan rules

    TextRequired

    DEFINED_BENEFIT_PLAN_IN_SURPLUS_WITH_ASSETS_ABOVE_THE_OBLIGATION_AT_THE_CLOSING_DATE

  • Rights of the entity: refund, reduction in future contributions, conditions and agreement of the trustees

    TextRequired

    REDUCTION_OF_FUTURE_CONTRIBUTIONS_WITHOUT_PRIOR_AGREEMENT_AND_REFUND_ONLY_WITH_THE_DISCRETIONARY_AGREEMENT_OF_THE_TRUSTEES

  • Surplus of the plan (obligation and assets: case data)

    Number

    1,350,000

  • Present value of the available benefits, discounted at the discount rate of the plan (case data or result of the computation)

    Number

    418,205.38

  • Floor of the available benefit (zero)

    Number

    0

  • Present value of the future service cost over the horizon retained (data from the actuary)

    Number

    1,197,343.7

  • Present value of the minimum funding contributions for future service over the same horizon (data from the actuary)

    Number

    779,138.32

  • Future service cost, year 1 (case data)

    Number

    430,000

  • Minimum funding contributions for future service, year 1 (case data)

    Number

    180,000

  • Future service cost, year 2 (case data)

    Number

    440,000

  • Minimum funding contributions for future service, year 2 (case data)

    Number

    470,000

  • Future service cost, year 3 (case data)

    Number

    450,000

  • Minimum funding contributions for future service, year 3 (case data)

    Number

    210,000

2

Supporting documents

Evidence

  • Documents obtained and referenced (plan rules, funding schedule, actuary report, legal opinion)

    EvidenceRequired

3

Analysis: availability of the benefits and minimum funding

Analysis

IAS 19 §64IAS 19IAS 19

  • Points examined: asset ceiling

    ChecklistRequired

    • Unconditional right to realise the benefit during the life of the plan or on its settlement, even if not immediately realisable
    • Intentions of the entity about the surplus set aside
    • Ceiling = present value of the available benefits, discounted at the discount rate of the plan
    • Minimum funding contributions for future service above the service cost: the excess reduces the available benefit, which is never below zero
    • Contributions covering an existing deficit for past service: no effect on the benefit for future service
4

Calculations

Calculations

IAS 19 §64IAS 19IAS 19

  • Year 1: minimum funding contributions − service cost (negative = benefit, positive = excess that reduces the benefit)

    Calculation

    -250,000

    Minimum funding contributions for future service, year 1 (case data) ; − Future service cost, year 1 (case data)

  • Year 2: minimum funding contributions − service cost (negative = benefit, positive = excess that reduces the benefit)

    Calculation

    30,000

    Minimum funding contributions for future service, year 2 (case data) ; − Future service cost, year 2 (case data)

  • Year 3: minimum funding contributions − service cost (negative = benefit, positive = excess that reduces the benefit)

    Calculation

    -240,000

    Minimum funding contributions for future service, year 3 (case data) ; − Future service cost, year 3 (case data)

  • Present values: minimum funding contributions − service cost (negative = benefit, positive = net excess)

    Calculation

    -418,205.38

    Present value of the minimum funding contributions for future service over the same horizon (data from the actuary) ; − Present value of the future service cost over the horizon retained (data from the actuary)

  • Available benefit in present value, before the floor (service cost − contributions, when positive)

    Calculation

    418,205.38

    Present value of the minimum funding contributions for future service over the same horizon (data from the actuary) ; − Present value of the future service cost over the horizon retained (data from the actuary)

  • Benefit available as a reduction in contributions, floor at zero

    Calculation

    418,205.38

    Available benefit in present value, before the floor (service cost − contributions, when positive) ; Floor of the available benefit (zero)

  • Net asset recognised: the lower of the surplus and the ceiling

    Calculation

    418,205.38

    Surplus of the plan (obligation and assets: case data) ; Present value of the available benefits, discounted at the discount rate of the plan (case data or result of the computation)

  • Effect of the ceiling (surplus − net asset recognised)

    Calculation

    931,794.62

    Surplus of the plan (obligation and assets: case data) ; − Net asset recognised: the lower of the surplus and the ceiling

5

Illustrative entry

Entries

  • Effect of the ceiling in other comprehensive income

    Entry

    AccountDebitCredit
    Remeasurements (other comprehensive income)931,794.62
    Net defined benefit asset931,794.62
6

Judgment: availability of the economic benefits

Judgment

IAS 19 §64IAS 19IAS 19

  • Does the entity have an unconditional right to a refund or to a reduction in future contributions?

    JudgmentRequired

    Unconditional right to a reduction in future contributions

    Unconditional right to a reduction in future contributions / Unconditional right to a refund / No unconditional right: no benefit available

    Professional judgment: availability rests on an unconditional right, not on the intention of the entity; the facts of the plan rules are case data.

  • Rationale: plan rules, required agreement of the trustees and conditions

    Text

    THE_PLAN_RULES_ALLOW_THE_REDUCTION_WITHOUT_ANY_AGREEMENT_WHILE_THE_REFUND_DEPENDS_ON_THE_TRUSTEES_AND_THE_INTENTION_OF_MANAGEMENT_CREATES_NO_RIGHT

7

Information to prepare for the notes

Disclosure

IAS 19 §64IAS 19IAS 19

  • Information: asset ceiling

    Checklist

    • Effect of the ceiling recognised in other comprehensive income
    • Reconciliation of the net asset recognised
    • Description of the restrictions on the surplus and of the minimum funding requirements
8

Effect on the financial statements

FS impact

  • Effect derived from the entries

    Table

9

Conclusion

Conclusion

  • Conclusion: availability of the benefits, net asset recognised and effect of the ceiling

    ConclusionRequired

10

Normative references

References

  • Normative references cited in this workpaper

    References

11

Checks and financial statement impact

  • Plan facts recordedPass
  • Rights of the entity recordedPass
  • Judgment on availability recordedPass
  • Ceiling = available benefit computed from the minimum fundingPass
  • Surplus = net asset recognised + effect of the ceilingPass
  • Benefit available as a reduction in contributions never below zeroPass
  • Ceiling entry balancedPass
Assets
-931,794.62
Liabilities
0
Profit or loss
0
OCI
-931,794.62
Equity
-931,794.62