Remeasurement before the plan event

Learning objectives

• Determine the order of the steps when a plan event occurs: remeasurement, past service cost or gain or loss on settlement, then the asset ceiling.L3
• Calculate net interest for the remainder of the period on the remeasured net liability from the data of a case.L3

Normative references

• IAS 19 §99When determining past service cost or a gain or loss on settlement, the entity remeasures the net defined benefit liability (asset) using the current fair value of plan assets and current actuarial assumptions (including current market interest rates and other current market prices), reflecting the benefits offered and the plan assets before and after the plan amendment, curtailment or settlement.
• IAS 19 §101AWhen a plan amendment, curtailment or settlement occurs, past service cost or the gain or loss on settlement is determined without considering the effect of the asset ceiling; the effect of the asset ceiling is then determined after the event, and any change in it is recognised in remeasurements (para. 57(d)) (amendments of February 2018).
• IAS 19 §122ACurrent service cost is determined using the actuarial assumptions determined at the start of the annual reporting period, unless a remeasurement follows a plan amendment, curtailment or settlement, after which the assumptions used for that remeasurement apply for the remainder of the period (2018 amendments).
• 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

• On 1 July, following a plan amendment, Zelmar SA remeasures its net defined benefit liability and obtains {net_remeasured} after taking the event into account. The discount rate of the remeasurement is 4.4% a year; as six months of the year remain, the effective rate for the rest of the period is {effective_rate} (case convention: no contribution or benefit changes the net liability up to the reporting date). At the start of the year, the net liability was {net_open}, with a rate of 3.8% (case data). Calculate net interest for the second half-year.L3
• On 1 April, before measuring the past service cost of a plan amendment, Vernier SA remeasures its net liability using current assumptions and fair value. The remeasurement shows an increase in the net liability of {remeasurement}, due to the fall in the discount rate since the last reporting date. Post the entry for this prior remeasurement.L3
• On 1 October, Sorel SA amends its defined benefit plan by reducing future benefits. The management controller proposes, "to avoid complications", to keep the opening assumptions for the service cost and net interest of the last quarter, and to measure the past service cost with the obligation at the last reporting date (case facts). Write a note that sets out the values and assumptions to use, what is a matter of professional judgement and the conclusion.L3