The net defined benefit liability (asset)

Learning objectives

• Explain how the deficit or surplus of a plan and the net defined benefit liability (asset) are determined.L1
• Calculate the net defined benefit liability (asset) from the obligation and the fair value of plan assets given in a case.L2

Normative references

• IAS 19 §8Definitions: categories of benefits (short-term, i.e. expected to be settled wholly before twelve months after the end of the annual reporting period in which the service is rendered; post-employment; other long-term; termination benefits); defined contribution plan (fixed contributions paid into a separate entity, with no legal or constructive obligation to pay further contributions if the fund is insufficient) and defined benefit plan (any other plan); deficit or surplus (present value of the obligation less the fair value of plan assets), net defined benefit liability (asset) (the deficit or surplus adjusted for the effect of the asset ceiling) and asset ceiling (present value of the refunds or reductions in future contributions available); plan assets (assets held by a legally separate fund dedicated to the benefits, and qualifying insurance policies, not available to the entity's creditors); past service cost (change in the obligation for prior service resulting from a plan amendment or a curtailment, the latter being a significant reduction in the number of employees covered); settlement (a transaction that eliminates all or part of the obligations, other than benefits provided for in the plan terms and included in the actuarial assumptions).

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

3 questions

• The deficit of a defined benefit plan is the present value of the defined benefit obligation, less the fair value of plan assets where there are any.L1
• At 31 December, Bastide SA measures the obligation of its defined benefit plan at {dbo} (present value) and the fair value of plan assets at {assets}. The asset ceiling is not an issue (case data). Calculate the net defined benefit liability to present in the statement of financial position.L2
• Corvane SA measures the obligation of its defined benefit plan at 7,850,000 (present value) and the fair value of plan assets at 8,300,000. The present value of the economic benefits available as refunds or reductions in future contributions, the asset ceiling, is 600,000 (case data). What does Corvane present in its statement of financial position for this plan?L2