DEFINITION

SCOPE OF MFRS 126

• Deals with the reporting by retirement benefit plans (basically, the reporting by trustees who administer
• Retirement benefit plans are arrangements whereby an
the employers’ retirement benefit plans).
entity provides benefits for employees on or after
• It regards a retirement benefit plan as a reporting entity separate from the employers of the participants
termination of service (either in the form of an annual
in the plan.
income or as a lump sum) when such benefits, or the
• It focuses only on accounting and reporting by the plan to all participants as a group and does not deal
contributions towards them, can be determined or estimated
with reports to individual participants about their retirement benefit rights.
in advance of retirement from the provisions of a document
• Retirement benefit plans may be defined contribution plans or defined benefit plans.
or from the entity’s practices.
• Participants are the members of a retirement benefit plan
and others who are entitled to benefits under the plan.
• Net assets available for benefits are the assets of a plan
less liabilities other than the actuarial present value of DEFINED CONTIBUTION PLAN
promised retirement benefits. Reporting by plan manager
• Actuarial present value of promised retirement benefits Financial statements should contain:
is the present value of the expected payments by a • Statement of net assets available for the benefits
retirement benefit plan to existing and past employees, • Description of funding policy (MFRS126:13)
attributable to the service already rendered. Report should include:
• Vested benefits are benefits, the rights to which, under the • Description of activities for the period,
conditions of a retirement benefit plan, are not conditional
ACCOUNTING AND REPORTING BY • Effect of any changes related to the plan,
on continued employment. RETIREMENT BENEFIT PLANS • Description of the transactions and investment
(MFRS 126) performance for the period
• Description of investment policies (MFRS126:16)

DISCLOSURE DEFINED BENEFIT PLAN

The financial statements shall contain either (MFRS126:17):
The financial statements of a retirement benefit a. A statement that shows:
plan, whether defined benefit or defined • NA available for benefit;
contribution, shall also contain the following • Actuarial PV of promised benefit (vested/unvested)
information (MFRS 126:34): • Resulting excess or deficit
a. a statement of changes in net assets Or
available for benefits; b. Statement of NA available for benefits showing either:
b. a summary of significant accounting • Note disclosing the actuarial PV of promised benefit (vested/unvested); OR
policies; and • Reference to above information in an accompanying actuarial report
c. a description of the plan and the effect of If the actuarial valuation has not been prepared, the most recent valuation should be used.
any changes in the plan during the period. The financial statements shall explain (MFRS 126:19):
• the relationship between the actuarial PV of promised retirement benefits and the net assets
available for benefits, and
• the policy for the funding of promised benefits.
The objective of reporting by a defined benefit plan is periodically to provide information about the
financial resources and activities of the plan that is useful in assessing the relationships between the
accumulation of resources and plan benefits over time. This objective is usually achieved by providing
VALUATION OF RETIRMENT BENEFIT PLAN financial statements including the following (MFRS 126: 22):
ASSETS a. a description of significant activities for the period and the effect of any changes relating to the
plan, and its membership and terms and conditions;
Retirement benefit plan investments shall be b. statements reporting on the transactions and investment performance for the period and the
carried at (MFRS 126:32): financial position of the plan at the end of the period;
– Fair value; c. actuarial information either as part of the statements or by way of a separate report; and
– Market securities: FV = market price d. a description of the investment policies.
– FV not possible: explain why FV not used