The three components of cost

Learning objectives

• Identify the three components of defined benefit cost and where each is recognised.L1
• Calculate the amounts in profit or loss and in other comprehensive income from the components given in a case.L2

Normative references

• IAS 19 §120Defined benefit cost comprises three components: service cost (in profit or loss), net interest on the net defined benefit liability (asset) (in profit or loss) and remeasurements of the net defined benefit liability (asset) (in other comprehensive income), unless another Standard requires or permits their inclusion in the cost of an asset.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

5 questions

• The three components of defined benefit cost for a year (service cost, net interest and remeasurements) are recognised in profit or loss.L1
• For the year, the defined benefit plan of Aubrac SA shows a service cost of {service_cost}, net interest of {net_interest}, an actuarial loss on the obligation of {actuarial_loss} and a return on plan assets exceeding by {excess_return} the interest income included in net interest. No plan event occurred. Calculate the cost to recognise in profit or loss and the net remeasurement loss to recognise in other comprehensive income.L2
• A trainee presents the accounting for the components of defined benefit cost for a year. Which of the trainee's sentences is wrong?L2
• Elvane SA has two commitments. The liability for its long-service bonus, paid after twenty years of service, suffers a remeasurement loss of 5,100. The liability of its defined benefit pension plan suffers a remeasurement loss of 12,000. Where are these two losses recognised?L2
• A trainee prepares a note on the consequential amendments that IFRS 18 makes to IAS 19, applicable when the entity applies IFRS 18. Which of the trainee's sentences is wrong?L3