Skip to contentSkip to search

Ask the Tutor ACCA SBR

Handfood Co – September/December 2020 – Question 4(c)(ii)

MMAHEK_BAFNA11h ago

I have a query regarding the treatment of changes in assumptions in this part of the question.

The model answer states that an increase in expected salary growth or a decrease in the probability of employees leaving would increase the current service cost.

I understand that these changes would increase the expected benefit liability. However, wouldn't the increase arising from revised salary growth and employee retention assumptions be treated as an actuarial remeasurement rather than current service cost?

For example, if fewer employees are expected to leave, more employees are expected to qualify for the benefit. Although this increases the expected liability, it is due to a change in the retention assumption rather than additional services provided during the current year.

Could someone please clarify why the model answer links these changes to an increase in current service cost?

stephenwidbergstephenwidbergTutor3h ago#1

I don't have a copy of this question.

Current service cost and the closing liability are definitely calculated by the actuary.

Our only role is to determine UNEXPECTED CHANGES which are recognised in OCI, as you say.

I'm not sure whether you are using BPP or Kaplan or ACCA Practice Platform - if you are trying to query their model answer, you may find it easier to contact them

Sign into reply to this topic.