Contributions from members or third parties

Learning objectives

• Distinguish contributions that are independent of the number of years of service from those that depend on it.L3
• Calculate service cost net of employee contributions from the data of a case.L3

Normative references

• IAS 19 §93Contributions from employees or third parties set out in the formal terms of the plan reduce service cost if they are linked to service, or affect remeasurements otherwise; when linked to service, they are attributed to periods of service using the method required by para. 70 for the gross benefit if their amount depends on the number of years of service, and, if independent of it, may be deducted from service cost in the period in which the related service is rendered (amendment of November 2013).

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

1 question

• In the defined benefit plan of Fauvel SA, members make contributions. The gross service cost for the year is {gross_service_cost}. Member contributions amount to {flat_contrib}; they are calculated as a percentage of salary, independently of the number of years of service, and Fauvel elects to recognise them as a reduction of the service cost of the period. Other member contributions, of {service_linked}, increase with the number of years of service; the gross service cost already takes them into account (case data). Calculate the net service cost for the year (case data).L3