EMPLOYMENT BENEFITS THEORY

Directions: Highlight in yellow color your answer.

1. It refers to a plan where plan assets, if any, are retained and managed by the employer.
a. Funded plan c. Unfunded plan
b. Non-contributory plan d. Delicate plan

2. These are pool of assets contributed by various unrelated employers to be used to pay retirement benefits to
participants without regard to the identity of the contributing employers.
a. Multi-employer plans c. Pooling of assets plan
b. State plans d. Secret plan

3. Multi-employer plans are treated as

a. Defined contribution plan c. Hybrid plan
b. Defined benefit plan d. a or b

4. These are established by legislation and are operated by a government agency which is not subject to control or
influence by the reporting entity.
a. State plans b. SSS c. GSIS d. Puro plan

5. The accounting for defined contribution plan

a. is straightforward – actuarial computations are not required.
b. is complex – actuarial computations are required
c. is simple – not accounted for
d. is done only by CPAs

6. Under a defined contribution plan, the retirement benefits expense is

a. equal to an actuarially determined amount
b. equal to the agreed periodic contribution to the fund
c. equal to the contribution made during the period
d. zero, if no employee retired during the period

7. Employee benefits are all forms of consideration given by an entity in exchange for service rendered by employees.
Which of the following employee benefits is not within the scope of PAS 19?
a. Short-term d. Termination
b. Post-employment e. Share-based payments
c. Other long-term

8. Which of the following employee benefits is not within the scope of PAS 19?
a. Semi-monthly salaries of employees
b. Employer’s share in SSS contributions
c. One sack rice allowance
d. Bonus in the form the entity’s shares

9. Accumulating compensated absences are those that

a. can be carried over to the next period if not fully used during the year of entitlement.
b. expire if not fully used during the year of entitlement.
c. can be carried over to the next period if not fully used during the year of entitlement and are paid in cash when
the employee leaves the company
d. are recognized only when actually taken by employees
10. Which of the following components should be included in the calculation of net defined benefit cost recognized for a
period by an employer sponsoring a defined benefit pension plan?

Actual Return Amortization of

on Plan Assets, Unrecognized Prior Interest
If Any Service cost, If Any Cost

a. No No Yes
b. Yes No Yes
c. Yes Yes No
d. Yes Yes Yes

11. Which of the following concepts for postretirement benefit plans is comparable to the projected unit credit method of
pension plans?
a. Accrued benefit method pro-rated on service
b. Expected Postretirement Benefit Obligation (EPBO)
c. Actual return on plan assets
d. Expected return on plan assets

12. Which of the following statements is incorrect?

a. Minimum (corridor) amortization of net unrecognized gain or loss is allowed for postretirement benefit plans.
b. Gains and losses on settlement of defined benefit retirement plans are recognized immediately.
c. Actuarial gains and losses are recognized immediately.
d. Past service costs are recognized immediately.

13. The interest cost component of the net defined benefit cost is determined using
a. the settlement rate of interest.
b. the rate of return on high quality corporate bonds
c. both a and b.
d. neither a or b.

14. Financial reporting standards for pension currently in effect

a. allow both the accrued benefit and projected benefit methods.
b. allow only the accrued benefit method/ projected unit credit method.
c. allow only the projected benefit method.
d. do not allow either the accrued benefit or projected benefit methods.

15. Which of the following is not correct?

a. PAS 19 does not include any provisions for the recognition of an additional minimum liability.
b. PAS 19 does not allow for the recognition of a net pension asset equal to the computed surplus in some
circumstances.
c. PAS 19 requires the 10% corridor amount in calculating the amortization of deferred gains and losses.
d. PAS 19 requires settlement gains and losses to be recognized immediately as part of comprehensive income.

16. These are changes in the present value of the defined benefit obligation resulting from experience adjustments and
the effects of changes in actuarial assumptions.
a. Past service cost c. Settlement gains and losses
b. Actuarial gains and losses d. Interest cost

17. All of the following are demographic assumptions except:

a. future medical costs
b. mortality, both during and after employment
c. rates of employee turnover, disability and early retirement
 d. claim rates under medical plans

18. According to PAS 19, which of the following is not a financial assumption?
a. the discount rate
b. future salary and benefit levels
c. the expected rate of return on plan assets
d. the proportion of plan members with dependents who will be eligible for benefits

19. According to PAS 19, the rate used to discount post-employment benefit obligations shall be determined by reference
to market yields at the end of the reporting period on
a. risk-free rate c. current bank rate
b. high quality corporate bonds d. effective interest rate