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This part is taken from the consolidation question “Traveler” of December 2011
The actuarial value of Traveler’s pension plan showed a surplus at 1 December 2010 of $72 million, represented
by the fair value of the assets of $250 million, the present value of the defined benefit obligation of $200 million
and net unrecognised actuarial losses of $22 million. The average remaining working lives of the employees is
10 years. Traveler uses the corridor approach for recognising actuarial gains and losses. The aggregate of the
current service cost, interest cost and expected return on assets amounted to a cost of $55 million for the year.
After consulting with the actuaries, the company decided to reduce its contributions for the year to $45 million.
The contributions were paid on 7 December 2011. No entries had been made in the financial statements for the
above amounts. At the year end, the unrecognised actuarial losses were $20 million and the present value of
available future refunds and reductions in future contributions was $18 million.Its answer according to examiner is:
Accrual of contributions
The defined benefit asset would be as follows:
PV of obligation at 1 December 2010
200
Fair value of assets at 1 December 2010
(250)
Actuarial losses
(22)
––––
Pension surplus at 1 December 2010
(72)
Pension costs
55
Contributions accrued
(45)
––––
Pension surplus at 30 November 2011
(62)
Restriction of amount recognised as asset
24
––––
Pension surplus at 30 November 2011
(38)
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I’m confused in why have the unrecognised actuarial losses been added in the fair value of assets at 1 December 2010?The standard has changed since this exam question was set. There are now no longer unrecognised gains / losses. They are written off to profit or loss each year
The example in the course notes is answered according to the revised standard even though the video lecture has not yet been updated
Can you guide me please which standards are changed from 2010? The past papers in ACCA website are from 2010 and I think ACCA do not update or amend them
That’s a tough one and, simply, no I can’t remember them.
You might check on the ACCA’s web page – examinable documents.
But why do you want to know? Most of most of the answers are going to be unaffected. The exam is next week – stop worrying about little bits and concentrate on the bigger picture
And good luck
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