You are employed as the Senior Accountant of an organisation which offers the conditions of service as
Question:
You are employed as the Senior Accountant of an organisation which offers the conditions of service as described below:
(i) The Basic salary for the position of the Accountant is $20,000
(ii) Housing allowance is 30% of the basic salary
(iii)Transport allowance is paid at 10%
(iv) Pension contributions are as per act Additionally the company runs a contributory pension plan where the employer contributes 12% and the employee contributes 6%.
There is an unfunded defined benefit scheme in which the employee is paid at the rate of three months for each year served at the exit salary. Mr. Smith has been in your employment for more than five (5) years and he enjoys the above conditions of service. As at 31 December 2020, Mr. Smith had worked for the company for five (5) and as at 31 March 2021, his salary was increased by 10% on account of excellent performance. The employer’s obligations towards Smith were recorded at $228, 000 as at 1 January 2021 in the statement of financial position.
Required In line with the above information,
You are required to;
a. Discuss defined benefit and defined contribution plans in line with IAS 19
b. Differentiate past service cost from current service cost in accordance with IAS 19
c. Calculate the employer’s obligations as at 31 December 2020 based on the unfunded defined benefit plan
d. Calculate Mr. Smith employee benefits on the defined benefit scheme as at 31 March 2021
Financial Management for Decision Makers
ISBN: 978-0138011604
2nd Canadian edition
Authors: Peter Atrill, Paul Hurley