POST EMPLOYMENT BENEFITS

1. Fair value of plan assets

 fund set aside for the payment of future benefits

 the fund is legally separated from the reporting entity

 the fund exists solely to pay or fund employee benefits

Formula:
Fair value of plan assets, beginning Xxx
Add: Contributions Xxx
Actual return on plan assets xxx
Less: Benefits paid (xxx)
Settlement price of defined benefit obligation (xxx)
Fair value of plan assets, end Xxx

 Re-measurement gain or loss on plan assets

o Re-measurement gain or loss on plan assets = Actual return on plan assets

less Interest income on plan assets
 Actual return on plan assets - includes interest, income and other
income derived from the plan asses less any costs of managing the
plan assets and tax payable on the plan itself.
 Interest income on plan assets is also known as expected return on
plan assets
 Interest income on plan assets = Fair value of plan assets, beginning x
Discount rate
 Interest income > Actual return = Re-measurement loss
 Interest income < Actual return = Re-measurement gain

 Gains or losses on settlement (DBO - defined benefit obligation)

o Gains or losses on settlement = Settlement price of DBO less Present value
of DBO
 Settlement price of DBO > Present value of DBO = Loss on settlement
  Settlement price of DBO < Present value of DBO = Gain on settlement

2. Present value of defined benefit obligation (DBO)

Formula:
Present value of DBO, beginning Xxx
Add: Current service cost Xxx
Past service cost xxx
Interest expense xxx
Increase in DBO due to changes in actuarial assumptions xxx
Less: Benefits paid (xxx)
Present value of DBO settled (xxx)
Decrease in DBO due to changes in actuarial assumptions (xxx)
Present value of DBO, end Xxx

 Service cost
o Current service cost
o Past service cost
 Interest expense = Present value of DBO, beginning x Discount rate
 Actuarial gains or losses - changes in the present value of defined benefit obligation
o Increase in DBO due to changes in actuarial assumptions = Actuarial loss
o Decrease in DBO due to changes in actuarial assumptions = Actuarial gain

3. Net defined liability and net defined asset

 Net defined liability is also known as accrued benefit cost

 Net defined asset is also known as prepaid benefit cost
o Fair value of plan assets > Present value of defined benefit obligation = Net
defined asset
o Fair value of plan assets < Present value of defined benefit obligation = Net
defined liability