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IN KAPLAN book i read Unpaid contributions are liability and they need not to be part of plan assets.
However, in solution to question in BPP’s kit ,they have included in the performa workings that increases plan assets by unpaid contribution.Yes they were paid but after year end.Year END- 30th November 20X1
Contributions were paid on 7th December 20X1.Please suggest
2- Also , tell whether Contributions paid by employees increases plan assets for company.?
(referring to voluntary , compulsory )1) I seem to remember a past exam question where the examiner himself quoted the same point – that unpaid contributions should not be included. have you tried googling IAS 19 to see what the official detail is?
2) If a contribution is paid, surely that not only increases the liability but, just following double entry, we need a debit. Ask yourself, who receives the money from contributions paid into the scheme? Answer – the scheme. Yes, debit Plan Assets
I’ve just tried googling IAS 19 outstanding contributions – couldn’t find the answer. Maybe if you can find a definitive answer, you could post it on this site
1-Question was Traveller 12/11-UNPAID Contribution -Employee benefits.
I see it as unpaid contribution because it was paid after year end.(Would you please specifically look into the matter , and see if i am missing something ?).
(Yes googled, no success)
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(Did i get it right?)
If a contribution is paid by Employee (Whether it is discretionary or compulsory) , surely that not only increases the liability ( Do you mean contribution by employees increases obligation)
So its a [ Dr Plan Asset Cr Liability ]I’m still looking for a definitive answer to the unpaid contributions point but I’m pretty sure that your point 2) is correct. It increases the plan assets but it also increases the future obligations
Just found this – maybe it helps!
When an employee has rendered service to an entity during a period, the entity shall recognise the contribution
payable to a defined contribution plan in exchange for that service:
(a) as a liability (accrued expense), after deducting any contribution already paid.The link is:- https://www.ifrs.org/Documents/IAS19.pdf
^
But its defined contribution Plan,isnt it.
And we are concerned with defined benefit plan’s contributions.Also can you look into the question
Traveller 12/11,that’s a plus.Looking forward
This seems to be coming back to your original post!
“IN KAPLAN book i read Unpaid contributions are liability and they need not to be part of plan assets.”
I cannot see how it could be treated as an increase in the liability without being also an increase in the plan assets
I think you need to re-check what you have read in the Kaplan text and, if you have quoted it correctly to me, then you need to contact Kaplan.
Difficult though it may seem to be, there are occasions when even the great and the good make mistakes. I’m not saying that Kaplan has! It’s just that I cannot see the logic behind what they have printed and I’m not able to source it on the web
Sorry to pull out of the conversation – perhaps you’ll let me know what Kaplan’s response is
Alright 🙂 but i need to go with atleast a final conclusion before sitting at exams.
And i.e : Unpaid contributions is part of Asset plus a liability [but separately accounted right ] Otherwise that would have set off the effect Net Defined Liability.
this conclusion is reasonable with goodluck 🙂 ?
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