CoreIntermediate · Advanced
Net interest
Learning objectives
- Calculate net interest as the net defined benefit liability (asset) multiplied by the discount rate from the data of a case.L2
- Recognise the net interest for the period in profit or loss.L3
Normative references
- IAS 19 §123Net interest on the net defined benefit liability (asset) is determined by multiplying that net defined benefit liability (asset) by the discount rate specified in para. 83; the date at which both are determined is set in para. 123A.
- IAS 19 §123AFor net interest, the entity uses the net defined benefit liability (asset) and the discount rate determined at the start of the annual reporting period, taking into account changes resulting from contributions and benefit payments during the period; after a remeasurement under para. 99, the remainder of the period uses the net defined benefit liability (asset) and the discount rate of that remeasurement (2018 amendments); interest income on plan assets uses the same rate (para. 125).
Original summaries of the paragraphs (reference register), never a quotation of the standard.
3 questions
- At the start of the year, the defined benefit plan of Brenac SA shows an obligation of {dbo_open} and plan assets with a fair value of {assets_open}. The discount rate set at the start of the year is {rate} (case data). No contribution or benefit is paid during the year. Calculate the interest on the obligation, the interest income on plan assets (at the same rate) and net interest.L2
- A trainee calculates the net interest of a defined benefit plan for the year. Which of his steps is wrong?L2
- The net defined benefit liability of Maurel SA was {net_open} at the start of the year. On 1 July, Maurel paid a contribution of {contrib} into the plan fund, which reduces the net liability; there is no other movement. As a case convention, the contribution is taken into account for the time remaining in the year, that is {time_percent} of the year. The discount rate at the start of the year is {rate}. Calculate the adjusted base of the net liability, then net interest for the year.L3
Practical cases
- Defined benefit plan over a year: service cost, net interest, reconciliations of the obligation and the assets, remeasurement as a balancing item and entriesL3
- Plan amendment and settlement during the year: prior remeasurement, past service cost, settlement loss and net interest for the rest of the periodL3
- Year-end employee benefits file: plan classification, short-term benefits, cost of a defined benefit plan, plan event and asset ceilingL4