Attribution to periods of service

Learning objectives

• Explain that benefit is attributed to periods of service under the plan's benefit formula.L2, L3
• Analyse, from a case, how the benefit is allocated between periods of service.L3

Normative references

• IAS 19 §70Benefit is attributed to periods of service under the plan's benefit formula; if service in later years leads to a materially higher level of benefit than in earlier years, benefit is attributed on a straight-line basis from the date when service first leads to benefits until the date when further service leads to no material amount of further benefits (other than from further salary increases).

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

2 questions

• The plan formula of Halvern SA, case data, pays each employee, on retirement, a lump sum of {annual_amount} per year of service completed in the entity. An employee has completed {years_served} at the measurement date and is expected to complete {future_years} more; the lump sum will be paid in {years_to_payment}. As a case assumption, no leaving or death is assumed before payment, and the discount rate is {rate}. Calculate the benefit attributed to services rendered under the plan formula, then its present value.L3
• To measure its obligation, Sorane SA attributes the plan benefit to periods of service by a simple pro rata of years, without reading the plan formula: this approach complies with IAS 19 (para. 70).L2