The obligation and assets reconciliation

Learning objectives

• Prepare the reconciliation of the obligation and plan assets from opening to closing balances from the data of a case.L3
• Determine the remeasurement as the balancing figure between the closing balance given and the calculated balance.L3

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.
• 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).
• IAS 19 §127Remeasurements of the net defined benefit liability (asset) comprise actuarial gains and losses, the return on plan assets excluding amounts included in net interest, and any change in the effect of the asset ceiling excluding amounts included in net interest (further detail in paras. 128 to 130).

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

3 questions

• The defined benefit obligation of Garnel SA was {dbo_open} at the start of the year. For the year: service cost {service_cost}; discount rate at the start of the year {rate} (case data); benefits paid by the plan {benefits_paid}. No amendment, curtailment or settlement. The actuary measures the closing obligation at {dbo_close}. Calculate the interest on the obligation, the expected closing obligation based on the movements, then the actuarial loss, obtained as a balancing figure.L3
• The fair value of the plan assets of Pelcor SA was {assets_open} at the start of the year. During the year: discount rate at the start of the year {rate} (case data); employer contributions {contrib}; benefits paid by the fund {benefits_paid}. The closing fair value of the assets is {assets_close}. Calculate the interest income on the assets, the expected closing fair value based on the movements, then the return on assets excluding interest income, obtained as a balancing figure.L3
• Navelle SA pays {contribution} in cash into the fund of its defined benefit plan, in accordance with its funding plan. Post the entry for the payment.L3