CERTYNEX IFRS ACADEMY

Ormel SA funds its pensions in two ways. A legally separate fund, which exists only to pay employee benefits, whose assets are beyond the reach of the entity's creditors and return to the employer only under limited conditions, holds 9,400,000 of investments. In addition, the entity directly holds 2,100,000 of securities that it has earmarked as an internal reserve for pensions, with no separate fund (case facts). What amount is deducted from the obligation as plan assets?

9,400,000: only the investments of the legally separate fund meet the definition of plan assets.

11,500,000: all the investments the entity has allocated to pensions, whether in a fund or not, are plan assets.

2,100,000: securities held directly by the entity are easier to realise than a fund's investments, so they are preferable.

Zero: plan assets are deducted from the obligation on the date when benefits are actually paid to retirees, not before.