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IAS 19Workpapers (Step 4 of 5)

Workpaper assignment

Step 4 of 5
Mission · workpaperWorkpaper · IAS 19L4 · Expert

Documents

Company profile and case conventions

Memo

Company profile and case conventions

Vellaris SA (fictitious entity) makes electronic components; it closes its accounts on 31 December and its functional currency is the euro. Case conventions (pedagogical assumptions): amounts in EUR; the defined benefit cost of the year is already recognised before the ceiling, so the surplus is in the net asset and the effect of the ceiling was nil at the opening; the horizon of the future flows is limited to three years; no minimum funding requirement creates an additional liability; the tax effect is ignored; the rates, the flows and the sensitivities are data from the actuary.

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

Plan in surplus: asset ceiling, minimum funding, member contributions and disclosures

6 documents9 sections to document
0 / 6 sections completed
Guided mode

Section 1 of 9

Objective

In progress
Section brief
What to document
The engagement, its scope and the working mode chosen.
Why
A workpaper answers one precise question: framing it avoids off-topic work.
How
Read the objective and the assignment, then choose the mode (guided, semi-guided, professional).
Expected result
You know which question the workpaper must settle, and for which reporting date.
Your role
Preparer of the IAS 19 workpaper
Level
Expert
Estimated time
≈ 90 min
Progress
0 / 5 steps done (review excluded)

Context

Vellaris SA (fictitious entity) closes its accounts on 31 December 20X6. Its defined benefit pension plan, funded through a separate fund, shows a surplus at the closing date. The finance director wants to know which net asset to recognise in the statement of financial position, how to take the required minimum funding into account, how to treat the contributions of the members and which information to prepare for the notes.

Assignment

Asset ceiling of the Vellaris plan

Purpose 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.

Questions of the file covered by this workpaper

  • 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.

Documents in the file

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