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Hi
Defined benefit is a traditional method, where the pensions are based on the years of service and salary level when they retire is this right?
what is contribution benefit? is this something to do with NIC?
Also in the calculation of DB, does the net remeasurement gain goes in the OCI as a credit?
looking at the savage example in the kaplan book, there is a remeasurement loss i think of $21, will this DR the OCI.lastly where does the current service cost go under the Income statment, what heading?
Hi Karen
“what is contribution benefit? ” – I think you mean defined contribution. this is where contributions are paid in and are not based on some future estimate of pension entitlement. The company contributes a percentage of your salary (and you may also contribute from your pre-tax earnings – additional voluntary contributions – and then, on retirement, the value of the “pot” attributable to you is taken out and an annuity is purchase entitling you to a monthly pension for the remainder of your life
The net re-measurement gain (or loss) is credited (or debited) to other comprehensive income
“Where does the current service cost go under the Income statement” – the answer to that depends on the department in which the employee works. If in production, then cost of sales: if in admin, then in admin expenses: if in selling and distribution, then in distribution costs
OK?
so if its a gain it gets credited to the P&L and does it go under OCI? and a loss it gets debited?
lets say if i had a question on cashflows, would a remeasurement gain be adjusted in the operating cashflows? and would past and service costs be adjusted as well?
I am also reading the article in the acca website (IAS 39) it states that impairement loss are incurred only if a loss event has occured and it impacts on future cashflows, which is called incurred loss, I dont understand why it would result in an overstatement of both assets and profits. and also i do not understand the proposed model that IASB has introduced in terms of credit loss. does it mean that incurred loss are not recognised because it overestimates the profits and assets, so instead they introduced expected loss?
in terms of calculating impairment loss do you always have to discount it? and is impairment the similar to amortisation of intangible assets.
Wow Karen! How many questions can you ask in one breath?
Yes, loss gets credited (re measurement gain) or debited ($if it’s a loss) in OCI
No, because our start point in a cash flow is “profit after tax” which is BEFORE OCI
Give me a reference to the article please
If, when considering N impairment, you are looking at VIU, the yes, you have to discount to get the pv of future cash flows
No, amortization is normally a fixed percentage of the asset whereas impairment is a one-off
Ok?
Hi Mike,
ok thanks, the article link
see the exam paper are the last question usually based on current issues?
Thanks for the link Karen.
When your examiner was writing this exam for 10 days’ time, it would have been back in the middle of 2012. Now, he COULD have arranged with Tom Clendon to write an article on financial assets so, yes, read it. But I doubt very much that it will be asked.
However, I could be SO wrong, so read it twice!
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