ToA.1822 Employee Benefits Online
ToA.1822 Employee Benefits Online
ToA.1822 Employee Benefits Online
REVIEW QUESTIONS
1. The objective of PAS 19 is to prescribe the accounting 6. An entity contributes to an industrial pension plan that
and disclosure for employee benefits. The Standard provides a pension arrangement for its employees. A
requires an entity to recognize: large number of other employers also contribute to the
a. A liability when an employee has provided service pension plan, and the entity makes contributions in
in exchange for employee benefits to be paid in the respect of each employee. These contributions are kept
future. separate from corporate assets and are used together
b. An expense when the entity consumes the with any investment income to purchase annuities for
economic benefit arising from service provided by retired employees. The only obligation of the entity is
an employee in exchange for employee benefits. to pay the annual contributions. This pension scheme
c. Both a and b is a
d. Neither a nor b a. Multiemployer plan and a defined contribution
scheme
2. Employee benefits are b. Multiemployer plan and a defined benefit scheme
a. All forms of consideration given by an entity in c. Defined contribution plan only
exchange for service rendered by employees or for d. Defined benefit plan only
the termination of employment.
b. Benefits that are expected to be settled wholly 7. The relationship between the amount funded and the
before twelve months after the end of the annual amount reported for pension expense in a defined
reporting period in which the employees render the benefit plan is as follows:
related service. a. Pension expense must equal the amount funded.
c. Benefits that are payable after the completion of b. Pension expense will be less than the amount
employment. funded.
d. Benefits other than short-term employee benefits, c. Pension expense will be more than the amount
post-employment benefits and termination funded.
benefits. d. Pension expense may be greater than, equal to, or
less than the amount funded.
3. Termination benefits are employee benefits provided in
exchange for the termination of an employees 8. The deficit or surplus is:
employment as a result of: a. The present value of the defined benefit obligation.
a. An entitys decision to terminate an employees b. The fair value of plan assets.
employment before the normal retirement date. c. The difference between a and b.
b. An employees decision to accept an offer of d. The total of a and b.
benefits in exchange for the termination of
employment. 9. In accordance with the revised PAS 19, the asset
c. Either a or b ceiling includes?
d. Neither a nor b a. Unrecognized actuarial losses
b. Unrecognized past service cost
4. Which of the following is a characteristic of a defined c. Present value of any economic benefits available in
benefit plan? the form of refunds from the plan or reductions in
a. The entitys legal or constructive obligation is future contributions to the plan.
limited to the amount that it agrees to contribute d. All of the above.
to the fund.
b. The amount of the post-employment benefits 10. Service cost excludes
received by the employee is determined by the a. Current service cost
amount of contributions paid by an entity to a b. Past service cost
post-employment benefit plan or to an insurance c. Gain or loss on settlement
company, together with investment returns arising d. Actuarial gains and losses
from the contributions.
c. Actuarial risk (that benefits will be less than 11. Past service cost is
expected) and investment risk (that assets a. The increase in the present value of the defined
invested will be insufficient to meet expected benefit obligation resulting from employee service
benefits) fall, in substance, on the employee. in the current period.
d. If actuarial or investment experience are worse b. The change in the present value of the defined
than expected, the entitys obligation may be benefit obligation for employee service in prior
increased. periods, resulting from a plan amendment or a
curtailment (a significant reduction by the entity in
5. If a pension plan is non-contributory, who makes the the number of employees covered by a plan).
contributions? c. The difference between the present value of the
a. Both the employer and employee defined benefit obligation being settled, as
b. Only the employee determined on the date of settlement and the
c. Only the employer settlement price, including any plan assets
d. No one transferred and any payments made directly by the
entity in connection with the settlement.
d. The change during the period in the net defined c. Both a and b
benefit liability (asset) that arises from the d. Neither a nor b
passage of time.
18. Which of these events will cause a change in a defined
12. An entity operates a defined benefit pension plan and benefit obligation?
changes it to a defined contribution plan. The defined I. Changes in mortality rates or the proportion of
benefit plan still relates to past service but not to employees taking early retirement.
future service. The net pension liability after the plan II. Changes in the estimated salaries or benefits that
amendment is P70 million, and the net pension liability will occur in the future.
before the amendment was P100 million. How should III. Changes in the estimate employee turnover.
the entity account for this change? IV. Changes on the discounted rate used to calculate
a. The entity recognizes a gain of P30 million defined benefit liabilities and the value of assets.
b. The entity does not recognize a gain a. I, II, III and IV c. I, II and IV
c. The entity recognizes a gain of P30 million over the b. II and III d. II, III and IV
remaining service lives of the employees
d. The entity recognizes the gain but applies the 10% 19. In accordance with the revised PAS 19, which of the
corridor approach to it following can be deferred?
a. Actuarial gains and losses
13. An entity on December 31, 2014, changes its defined b. Past service cost if not yet vested
benefit pension plan to a defined contribution plan. The c. Both a and b
entity agrees with the employees to pay them P9 d. Neither a nor b
million in total on the introduction of a defined
contribution plan. The employees forfeit any pension 20. In accordance with the revised PAS 19, which of the
entitlement for the defined benefit plan. The pension following is reported in profit or loss?
liability recognized in the balance sheet at December a. Actuarial loss on defined benefit obligation
31, 2014, was P10 million. How should this b. Actuarial gain on plan assets
curtailment be accounted? c. Interest on the effect of asset ceiling
a. A settlement gain of P1 million should be shown d. Gain or loss on routine settlements
b. The pension liability should be credited to reserves
and a cash payment of P9 million should be shown 21. In accordance with the revised PAS 19, which of the
in expense in the income statement following is not reported in profit or loss?
c. The cash payment should go to reserves and the a. Gain or loss on non-routine settlements
pension liability should be shown as a credit to the b. Past service cost if not yet vested
income statement c. Net interest on defined benefit asset.
d. A credit to reserves should be made of P1 million d. None of the above
14. Remeasurements of the net defined benefit liability 22. Which statement is incorrect regarding short-term
(asset) exclude employee benefits?
a. Actuarial gains and losses. a. Short-term employee benefits include non-
b. The return on plan assets excluding amounts monetary benefits for current employees if
included in net interest on the net defined benefit expected to be settled wholly before twelve
liability (asset). months after the end of the annual reporting
c. Any change in the effect of the asset ceiling, period in which the employees render the related
excluding amounts included in net interest on the services.
net defined benefit liability (asset). b. An entity need not reclassify a short-term
d. The change during the period in the net defined employee benefit if the entitys expectations of the
benefit liability (asset) that arises from the timing of settlement change temporarily.
passage of time. c. If profit-sharing and bonus payments are not
expected to be settled wholly before twelve
15. Which of these elements are taken into account when months after the end of the annual reporting
determining the discount rate to be used? period in which the employees render the related
a. Markets yields at the balance sheets dates on high- service, those payments are other long-term
quality corporate bonds employee benefits.
b. Investment or actuarial risk d. PAS 19 requires disclosures about short-term
c. Specific risk associated with the entity's business employee benefits for key management personnel.
d. Risk that future experiences may differ from
actuarial assumptions 23. When an employee has rendered service to an entity
during an accounting period, the entity shall recognize
16. In accordance with PAS 19, the discount rate used to the undiscounted amount of short-term employee
determine defined benefit cost reflects benefits expected to be paid in exchange for that
a. Time value of money service:
b. Actuarial risk a. As a liability, after deducting any amount already
c. Investment risk. paid.
d. All of the above b. As an expense, unless another PFRS requires or
permits the inclusion of the benefits in the cost of
17. Actuarial gains and losses are changes in the present an asset.
value of the defined benefit obligation resulting from: c. Both a and b
a. Experience adjustments (the effects of differences d. Neither a nor b
between the previous actuarial assumptions and
what has actually occurred).
b. The effects of changes in actuarial assumptions.
24. Which statement is incorrect regarding short-term paid 25. A liability for compensated absences, for which it is
absences? expected that employees will be paid, should
a. An entity may pay employees for absence for a. Be accrued during the period when the
various reasons including holidays, maternity or compensated time is expected to be used by
paternity, sickness and short-term disability. employees.
b. Accumulating paid absences are those that are b. Be accrued during the period following vesting.
carried forward and can be used in future periods if c. Be accrued during the period when earned.
the current periods entitlement is not used in full. d. Not be accrued unless a written contractual
c. An entity shall measure the expected cost of obligation exists.
accumulating paid absences as the additional
amount that the entity expects to pay as a result 26. An entity shall recognize a liability and expense for
of the unused entitlement that has accumulated at termination benefits
the end of the reporting period. a. When the entity can no longer withdraw the offer
d. An entity shall recognize the expected cost of of those benefits.
short-term employee benefits in the form of non- b. When the entity recognizes costs for a
accumulating paid absences when the employees restructuring that is within the scope of PAS 37
render service that increases their entitlement to and involves the payment of termination benefits.
future paid absences. c. At the earlier of a or b.
d. At the later of a or b.
2. Which of the following statements characterizes 7. An entity has decided to improve its defined benefit
defined benefit plans? pension scheme. The benefit payable will be
a. They are comparatively simple in construction and determined by reference to 60 years service rather
raise few accounting issues for employers. than 80 years service. As a result, the defined benefit
b. Retirement benefits are based on the plan's pension liability will increase by P10 million. The
benefit formula. average remaining service lives of the employees is 10
c. Retirement benefits depend on how well pension years. How should the increase in the pension liability
fund assets have been managed. by P10 million be treated in the financial statements?
d. All of the above. a. The past service cost should be charged against
retained profit
3. A pension liability is reported when b. The past service cost should be charged against
a. The defined benefit obligation exceeds the fair profit or loss for the year
value of pension plan assets. c. The past service cost should be spread over the
b. The accumulated benefit obligation is less than the remaining working lives of the employees
fair value of pension plan assets. d. The past service cost should not be recognized
c. The pension expense reported for the period is
greater than the funding amount for the same 8. Which of these assets should be included within the
period. valuation of the plan assets?
d. Accumulated other comprehensive income exceeds a. Unpaid contributions
the fair value of pension plan assets. b. Unlisted corporate bonds that are redeemable but
not transferable without the entity's permission
4. In determining the present value of the prospective c. A loan to the entity that cannot be assigned to a
benefits (often referred to as the defined benefit third party
obligation), the following are considered by the d. Investments in listed companies
actuary:
z
a. Retirement and mortality rate. - end of ToA.1822 -