The document is a detailed transcription of a meeting discussing pension schemes, specifically focusing on accounting for pension schemes. Here are the key points that you should understand and remember:
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Types of Pension Schemes: Two primary types of pension schemes are defined – the Defined Contribution Scheme固定缴款计划 and the Defined Benefit Scheme. The Defined Contribution Scheme is simpler to account for, as the employer's contributions are predefined and go directly as an expense in the profit and loss account. In contrast, the Defined Benefit Scheme is more complex, as the benefits payable to the employee are predefined, and various factors like employee lifespan post-retirement and retirement age need to be considered.
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Accounting for Defined Contribution Schemes: For these schemes, the employer's contributions are predefined and recognized as an expense in the operating profit. This is part of the overall cost of employing someone, including wages and salaries.
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Accounting for Defined Benefit Schemes固定福利计划: These are more complex due to predefined benefits and the uncertainties in determining the company's financial liabilities. Various factors like actuarial assumptions and market value of scheme assets and liabilities are considered. The liabilities must be discounted back to their present value.
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Role of Actuaries: Actuaries play a crucial role in advising companies on the contributions to be made to the scheme and the investments to be made with the funds within the scheme. They use patterns and statistics to estimate the company's liability for pension benefits.
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Accounting Objectives: The document details three main accounting objectives for pension schemes:
- Balance Sheet Objective: Reflecting the fair market value of the pension scheme assets and liabilities.
- Profit and Loss Objective: Recognizing the operating costs related to providing retirement benefits.
- Disclosure Objective: Providing explanatory notes in the financial statements for additional detail.
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Movements in Pension Scheme Assets and Liabilities: The document explains how changes in pension scheme assets and liabilities are accounted for, considering various elements like current and past service costs, financial costs, and actuarial gains or losses.
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Examples and Calculations: Several examples and detailed calculations are provided to illustrate how to account for different scenarios in pension schemes, highlighting the complexities and considerations in real-world accounting.
Understanding these key points will provide a solid foundation in the principles and practical aspects of accounting for pension schemes.
This document is a detailed record of a meeting to discussa pension plan, with a particular focus on the accounting of the pension plan. Here are the key points you should understand and remember:
Types of Pension Plans: There are two main types of pension plans defined - Defined Contribution Schemeand Defined Benefit SchemeDefined Benefit Scheme. Defined contribution plans are easier to account for because the employer's contribution is predeterminedand held directly asthe profit and loss account The cost in. In contrast, defined benefit plans are more complex because benefits paid to employees are predetermined , and various factors such as the employee’s lifespan after retirement and retirement age need to be considered. Accounting for Defined Contribution Schemes: For these schemes, employer contributions are predetermined , and recognized as expensesin operating profit. This is part ofthe total costof employing someone, including wages and salaries. Accounting for Defined Benefit SchemesDefined Benefit Schemes: due to predetermined benefits and determinationThese plans are further complicated by the uncertainty of the company's financial liabilities. Various factors, including actuarial assumptions and the market value of plan assets and liabilities, are considered. The liability must be discounted back to its present value. Role of the Actuary: The actuary plays a vital role in advising the company on the contributions to the plan and the investment of funds within the plan. They use patterns and statistics to estimate a company's pension benefit liability. Accounting Objectives: This document details the three main accounting objectives of pension plans: Balance Sheet Objectives: Reflection Fair market value of pension plan assetsand liabilities. Profit and loss target: Recognize operating costs associated with providing retirement benefits. Disclosure Objective: Provide explanatory notes in the financial statements to provide additional detail. Changes in pension scheme assets and liabilities: This document explains how to take into account changes in pension scheme assets and liabilities, taking into account current and past service costs, Financial costs and actuarial gains and losses and other factors. Examples and Calculations: Several examples and detailed calculations are provided to illustrate how to consider different scenarios in a pension plan, highlighting the complexities and considerations in real-world accounting. Understanding these points will provide a solid foundation in the principles and practical aspects of pension plan accounting.
Time: November 22, 2023 9:14 am
131 minutes 46 seconds of the afternoon
Ohh but if we make a start and we had a look at one of the short topics last week then it was implement and we'll have a look at the next one of the slightly shorter topics this week which is accounting for pension schemes.
They so let's open up the notes on pension schemes.
First of all ohh.
You have that right because as far as accounting for pension schemes concerned, we'll run through these notes, first of all to see how the principles of the topic are dealt with and.
Possibly by just running through these initial notes it does appear quite conceptually complex.
It is technically one of the more complex areas and when we have a look at a few questions, they're all actually very similar.
So once you practice a few questions on this particular type, but this particular topic rather, it's no, it means complexity might see just by my initial introduction to the topic and also any question on this particular topic tends to be quite similar.
There's not that much scope for inventing different type of questions on this particular topic.
哦，但是如果我们开始，我们看了上周的一个简短主题，然后它就实施了，我们将看看本周下一个稍短的主题，即养老金计划。因此，让我们打开有关养老金计划的注释。首先哦。你有这个权利，因为就养老金计划的会计而言，我们将浏览这些笔记，首先看看如何处理该主题的原则。可能只是通过浏览这些初始注释，它确实在概念上看起来相当复杂。从技术上讲，这是一个比较复杂的领域，当我们看几个问题时，它们实际上都非常相似。因此，一旦你练习了关于这个特定类型的几个问题，但这个特定的主题不是，这意味着复杂性可能会通过我对这个主题的初步介绍而看到，而且关于这个特定主题的任何问题往往非常相似。在这个特定主题上发明不同类型的问题的余地不大。他们也倾向于这样做。似乎练习一对夫妇遵循非常相似的格式，所以是的，我们将看看今天早上的一对夫妇，明天通过一对夫妇，OK.So 养老金计划或员工福利的努力 102，你不需要对养老金计划的运作方式有很好的了解，而且可能你的年龄不是我们以前接触过的东西。但是在第一页，我们将介绍养老金计划如何运作的原则，因为有必要对该计划如何运作的原则有一个基本的了解，以便了解它是如何计算的。但基本上，这是一项合法权利。也就是说，谁在英国暗示？
然后，公司必须为员工提供养老金计划，以便员工有权获得福利。然后当他们退休时，直到他们死去。因此，在“是”期间，公司必须向关注计划供款，以确保养老金计划部分有足够的资金来满足这些退休福利。然后，当它们到期时，公司会向养老金计划支付供款，我们正在做的是核算公司的财务报表。因此，我们感兴趣的是养老金计划如何反映为相关，它可以在资产负债表中的资产和负债的利润中支出。因此，我们从公司的角度来做弗朗西斯的声明。因此，该公司为该计划做出了贡献。我们雇用从计划中支付给他们的福利。在很多方面，对该计划的贡献幅度，公司将倾向于听取精算师的建议，精算师是相关专家。然后，在养老金计划领域，所以在整个笔记中，它确实谈到了实际的作用，而实际是该特定领域的独立专家。因此，实际上会建议公司向该计划投入哪些贡献。每个都特别。是的，也许还可以用计划内的资金对那些希望尝试增加养老金计划池的公司进行哪些投资，并尝试将资金投资于相关机会。呃，为了在本周内尝试最大化资金，所以他们实际上也倾向于提供投资恶习，为养老金计划中的资金提供适当的投资，以及如何最大化那里的资金以确保有足够的资金。当他们倒下时支付福利，是吗？有相当多的不确定性，实际上的整个作用是将他们的建议建立在假设和模式的基础上，因为没有人确切知道某人退休后能活多久。但我们可以看看这种模式，也许在那个特定的领域。因此，整个精算行业都是基于模式和统计数据，以及该特定行业的普通人有多长的时间，呃。然后，在他们去世的四个人之后，该特定行业的人的共同退休年龄往往是多少？就这两种可能性而言，男性女性模式之间有区别吗？因此，如果你只孤立地看待一个人，你永远无法准确猜测他们退休后能活多久。但是，如果你把整个行业看作一个整体，你可以看到模式。您可以看到统计数据和整个实际行业。然后它以与保险业相同的方式基于这些模式统计数据。它是和。因此，这就是它在第一页上真正谈论的，只是关于养老金计划如何运作的一点背景以及当时使用的一些术语。关于养老金计划，你需要注意的一件事是，因为这将特别影响它们的会计方式，是实践中存在的两种类型的养老金计划，即所谓的固定缴款计划和固定福利计划，正如我们将看到的那样，我们将在讨论这个话题时看到， 其中一个提出了会计问题，而且更复杂，但另一个没有会计问题，而且很容易解释。
6: 49 Therefore, from an accounting perspective, the simplest is the planned defined contribution.
So let’s look at that particular one first, right. So, in terms of employee benefits, there are two ways of expressing employee benefits. First, what's called a defined contribution plan, so it's a defined contribution plan is 1, as the name suggests, it's predefined employer contributions. So in the terms of the pension plan, it does say that the employer will pay a certain amount into the plan every year, which is predetermined, and this is the contribution that the employer, the company is expected to pay because we do the same thing from a company perspective , the employer, which is the contribution payable by the employer, which is predefined in terms of earnings. Uh, what do employees get when they retire. They are not predefined and it will vary depending on the amount in the pension plan. It's not that common as part of that particular point in time. In practice it's a defined benefit plan for cats, the second is time more commonly, this tends to be the most popular option in terms of how pension plans are practiced, but defined contribution plans do exist. That's a possibility, but the contributions the employer is expected to pay are predetermined and the actual benefits an employee receives will vary, depending on how big the pension plan is and when anyone retires that person. As far as candidates for pension schemes are concerned, the defined contribution schemes mentioned at the end of that particular section, there are no problems with the accounting of the scheme and therefore the contributions payable by the employer are predetermined. This is a fixed contribution payable. Every detail. Yes, this is predefined. So that's just a charge directly into the lost profits account and as part of the lost wages and salary costs account they are contributing to the pension scheme. So it's part of the total cost of employing someone that you need to pay them a pension. Therefore, it is appropriate to include costs, wages and salaries in the loss account. Therefore, contribution plans are defined and there are no accounting issues associated with them. So anything you'll see today and tomorrow will go through quite a bit of pass-through and questions, and it's unlikely that this will have any reference to defined contribution plans because there's no questions about it, nor are the contributions paid by the employer directly as expenses and profits Moscow.So it's a simple question in terms of how to calculate it. The more complicated one is the defined benefit plan, which is George's pension plan that exists just like my own. For example, a university pension plan is defined as a psychological plan. Therefore, in this particular case, what is defined is not the contributions payable by the employer, but the benefits payable to the employees. So I know for sure. For example, what I will get when I retire, will be a percentage of my final salary and a lump sum. You say this so employees know exactly what they're going to get when they retire. Employee benefits are usually a lump sum followed by a percentage of your final salary or average salary. It depends on the plans you see and the average salary or final size. There will be a lot of noise, and then there will be annual payments until we die. So no matter how long you live after time, the benefits to employees are predefined. But how does an employer account for this in financial statements? As I said before, you can never really reflect that properly if you look at a person in isolation. They can make a statement because this is very much an open-ended liability. If you look at a person in isolation, they get predefined benefits when they dress. But if a company tries to reflect this liability in its financial statements, they don't know when this person will retire. It could be between 55 and 65 years old, but we don't know exactly when, and we don't know how long they will live after retirement. So if you're looking at an individual, isolated benefit plan that's really defined, you can never really reflect or come close to a reliable estimate of that liability. It would be an unlimited liability, but as I said, the entire actuarial industry and the entire pension plan industry is very much like the insurance industry, based on statistics. It is based on patterns and assumptions, and the average lifespan of people after retirement in that particular sector. On average, what is the retirement age? It varies between 8:00 and women. Different parts of the country, etc., etc. So if we look at the assumptions, statistics, and patterns for that particular industry, we can estimate what we think the liabilities are.
Thus, the associated costs in lost profits, again determined gains, are more complex to explain. This morning we'll go through a few numerical examples to see exactly how it's calculated, but the defined contribution plan is very simple. You only enter food defined contributions as an expense in a PNL, but defined benefit plans are more complex plans. Therefore, almost every question that you will practice this week will be related to defined benefit plans because this is where accounting issues arise. So I say you really need to have a basic understanding of pensions. Please let me just know the details of QS, but have a basic understanding of how the plan works, the differences between defined benefit defined contribution plans, to be able to understand how they might work for me. Okay, next section, accounting objectives is the idea that I just mentioned about this problem, if you just look at one employee and in isolation, you can never predict open liabilities, but just choose based on patterns, assumptions, etc. . That's what I've already mentioned. OK. So, we're going to continue with the one or two apples approach to accounts, which is exactly 28, and that won't even be part of it, but how does the standard deal with accounting for pension plans? Okay, there are three goals. One is the balance sheet target. First point. Therefore, in the balance sheet, the financial statements should reflect the assets and liabilities of the pension plan arising from employee retirement benefit obligations at fair market value. So basically the first objective, the balance sheet objective is the fair value model that it uses. For pension plans, assets and liabilities are valued at their fair value, which you know. This is the fair value market value model used. Bullet .1 is the balance sheet. Point 2 is profit and loss, so the operating costs of providing retirement benefits, employee-related costs are recognized in the accounting period to which the benefit relates, in which the benefit is destroyed by the employee. Basically, it is a fair value model used on a balance sheet, where market value and income and expenses are derived from changes in assets and liabilities. So the incoming charges due to movement without triple the acetal identity are recorded in the appropriate muscles and we'll see exactly where the costs are on the income statement that we go through, we can. Expenses arise from changes in assets and liabilities, and they are being recorded. The last thing is, it should include a. It should include a supplemental statement, a related disclosure statement, so all of those standards tend to have a disclosure statement related to it. Therefore, this should be an explanatory paragraph included in the notes to the financial statements that further details the nature of the employee pension scheme. But as I said before, we don't really care about any disclosures, about how they might try to change you now. If you look at the Nan report, you'll see pages and pages of additional information that provides a breakdown of some of the numbers. Expand your paragraph, provide more details, etc. Okay, let's look at these goals in more detail. First, I just highlighted defined contribution plans. In any case, there is no problem with the accounting treatment and therefore the contributions payable to the scheme should be recognized in operating profit. They just go directly into the profit and loss account and spend it. Wages and salaries will be part of the expense because you have to deploy and deploy, they can as well. So with a defined contribution plan, there are no accounting issues, right? To find benefit plans, look no further than those. The vast majority of examples will be relevant to this. So there's a little bit of detail here, and maybe we need a little more detail to be able to answer any questions that we're going to see, but we'll pick out the highlights.
Richard Dunstan 16: 16 So this is a market value approach in terms of sleep quality.
In practice it may be that a little judgment may be required to assess the market value of the assets and liabilities associated with a pension scheme. As with any question, this is never going to be an issue because it has to tell you in the question that the market value of the plan's assets is this number. Market value, model liability is this number and you have to be informed of these things in order to arrive at these numbers. In practice, there are more issues associated with them, such as the fact that assets should be measured by their market value. Pension liabilities should be measured at market value but discounted back to present value as they provide belated memory. I go. If you look inside. So, yes, so the plan assets, the market value, again have to be informed, clarify the issue of pension liabilities, ask about their appropriate market value. Again, you must be told this number in the question. Some guidance is mentioned in the standard. The projected units method, that's specifically what I mean, it's a specific way of valuing pension plan liabilities and is actually often used, it takes into account reserves for projected earnings, and honestly, you don't need to go that deep, cause any problems It will say pension plan assets, market valuation of this larger pension plan liability, market value is this number. Which, perhaps, is somewhat relevant to some of the issues we're going to consider? She was just mentioned. And then there's the pension plan liability that should be discounted back to its present value because typically, that's going to be a long-term liability because people tend to live hopefully for a few years after retirement. So this is very much a long-term liability. So it should be discounted back to present value, but basically the key is, whichever is larger, it shouldn't be the sitting or the pension plan liability, you get the next pension plan as if you offset one against the other. As we'll see, on the balance sheet you get the net pension plan massage or the net pension plan liability. Use the market value model. Assessing market value in the real world can be a bit problematic, but as I said, it doesn't really matter. We see a little bit of that in any problem. You will be told that the market value of your plan assets is this market value. Planned assets and liabilities are what they are, so that's the balance sheet side of things. Balance sheet and balance sheet. The correct point is that the recognition section now talks about PR. So, as I said before, and hopefully they will come before the changes in citizens' liabilities generate revenues and expenditures. it. So if we have an opening plan asset and an ending plan asset, then the change during the year is related to the income expense, and we'll see you when we look at a couple of examples, the change during the year can come from 3 potential sources. So there are three potential areas where costs will again go into appropriate losses or as we'll see later, another performance statement, right. So the first one I mentioned to you, it's divided into different parts. It's called the current cost of service, and I didn't mention all the possibilities for these nodes. There's also past service costs, which are calculated in the same way we saw the question. So the current service cost is like a regular operating cost. It goes to the operational part of the P application, so the current cost of service is the additional pension cost that comes from the fact that the people who currently work for you work for you for another year and therefore get another year of tight money. Therefore, current service costs tend to be routine, predictable costs. That tends to be a percentage of wages and salaries, you know people who work for you, they might be earning a pension at 8% a year, it might be employee contributions employer contributions. So this tends to be a regular predictable cost. So this goes to the operational part of the PNP. There's also this cost of a pastor, as we'll see some of the issues and the cost of past services is that people who have worked for you live for another year over the next few years, David is also nervous. So the current cost of service is the people who currently work for you, and the past cost of service is the people who used to work for you. They either work for another year or live for another year, so they are entitled to another year of the pension plan and they have built up a year of pension liability. Current service costs and past service costs are a component of changes in a pension plan's assets and liabilities. So if you have beginning assets or liabilities, ending acid reliability, somewhere in between, there are probably 3 possibilities, one of which is our current or past cost of service. Another reason a pension plan, assets or liabilities may change is because of financial costs. It is either the expected return on the assets, as we would invest in pension scheme assets based on the actuary's advice, in interest-bearing accounts or government bonds, or whatever investment opportunities, stocks and shares are actually deemed most suitable. So the expected return on assets, which is why pension plans, assets or liabilities may change during the year, conversely our pension plan liabilities may pay interest, for example interest on a loan within a pension plan may would draw on interest from other financial liabilities they may have. So it's like the interest payable or interest receivable number. As we will see, you either get a figure for interest paid or a figure for interest received. No matter which one of the two it is, Da Shen, set them off. So the first element is like an action element. Past service costs are included in current service costs. The middle element is the financial element. It is either interest payable or interest receivable. Then there's the third possible reason for a pension plan, because it might change you. This is called the actuarial game or loss, and this is the volatility factor. This is fluctuation caused by changes in market value. So, for example, if a pension scheme does have a variety of different investments, they will fluctuate in the open market, and this fluctuation is known as actuarial player loss. This is the volatile element. So, following the same thought process, just like if you see a property fluctuating in the open market, the company cannot revalue the property, but the revaluation surplus, otherwise we would see. We have already seen that nothing is recorded as part of the profit for the year. It goes directly into the revaluation reserve at the bottom of the balance sheet. The revaluation surplus will not go directly into PR now as it is not a real profit. This is just a fluctuation in market value. It's not really a prophet until you actually sell the property. No matter what the market value was at the time. Therefore, our revaluation surplus is what is called an unrealized game. This is not a real game. This is just a fluctuation in market value, the principle is the same here. Are there any actuarial games or related to pension plan asset fluctuations? Again, this is an unimplemented game. This is not a real game. This is just a fluctuation in market value. So this relates to the second performance statement, which is the so-called statement of gross recognized gains and losses. Again, we see this when you go through examples. So just like the revaluation services for the property don't go directly into the profit and loss, but into the second performance statement. Any actuarial gains and losses for pension plans are treated in the same way, which is the final point of the note. So, as I said, it does appear to be quite complex technically. This is one of the more difficult areas of this particular concept, I do how you explain pension plans, because pension plans are not something that any group has likely encountered before. So it's conceptually more complex because, as I said before, when you actually look at a couple of examples, they're all really very similar in that all they do is pension plans. It's just a pension scheme so there's not that much room to invent different types of issues because all pension schemes will have the same type of transactions associated with them. But because the pension plans they wear tend to be very similar, there's not much room for inventing different types of problems. So, let’s take a look at a few of them.
Look at what types of approaches we can take. Okay, here's a couple of questions to look at today or tomorrow and we'll do this. Pension plan. Example at the beginning. What vision are we trying to solve? Uh, yeah, the last week before Christmas, you know, we're going to let them defend. I love you. But yes, I know you're not full yet. do you have? Have you ever tried to catch up on any of this stuff? That's how you know it's always going in a certain direction. Yeah, well, I'll definitely watch it. This will obviously take a little time, but I'm definitely going to try to do this for both modules before we start both modules, and then at least hopefully we'll get the data. Ideas about what we are going to do do nothing. Burgers.Yeah.Yeah, because all the actors on the team are coding. So, yeah, you can watch those who catch up with me. But yes, this will be the last time. We'll probably have this lesson the week before Christmas as usual. What's the lesson? Wednesday and Thursday, but I think there might be something on Thursday, so we might do a review lecture for those two modules on Wednesday, and then we might do it on the first Wednesday instead of Thursday, January.So you There will be. Before Christ, you will have one review action, one review section, rather than reviewing for two modules before and after Christmas, as the exam timetable is dictated by the registration form. I've seen it, so it should be. It should be released to students in the next week or two, but the exams are not filled until I think your exams don't start until around the 13th or 14th. So we can do revisions, sections, sessions, or sevens on everything.
So I'll let you know. Apparently close to the time we might do one before 1 after Christmas.Two.Yes. Again, some last year they asked. Okay, what is that? Project contracts also. Yes, that's the message of modeling, and yes, you have to do it. I would check with the office, sometimes they have special exams in January that more people reset, or sometimes they just have them do us 6IN maybe at the same time. It's like the level 5 you just put on. this is possible. So yes, that would be. So you're not married, right? Some people like to do this in January and finish earlier. Obviously you'll have finals in May, or some would rather do it where you have it, but everyone would rather. But yeah, I'll check it for you and see if it's done. you will. Whichever it is, I'm going to get in touch with the person I told you about last year. Where is Laura? Oh, Lord Knight. Yes, I will get in touch with her no matter what. If it's January, obviously get in touch with this as early as possible. Once she did, she suggested, we talked to them. Volume on certain dates. Let's send them an email at the office. If you book it for you. Oh, right. Yes. Dates, man. Just discussed with Laura some suggestions on which areas to focus on for revision. Not simple and stuffy data. Basically what I was doing and supporting me was really good and she gave me OK.
Let us be. Yes, I will. I'll see if I can get an attorney or if they're sitting there this afternoon like no.Right.OK.So yeah, that's the first question, uh, we're gonna see. This is just the first part A of the calculations and questions I want to go through, this is just a general discussion that touches on some of the issues I just talked about in my buying notes. Therefore, it is worth reading through the answers to the Discussion section of Part A, but the calculations will focus on just one thing. This is like an old question in this case, so it does refer to sat 24 = 17 effra 17 being the new standard for pension schemes, which is the same effort where one or two parts are responsible. Also, the content of 27 etc. Effra 17 is the same as the content of Effra 102. There is one more standard before that and that is 24. The answer doesn't really refer to the SAT 24 match focusing on 17 and 102 after that for 217.So .same, but SAT 44 was the one before. But yeah, essentially it just repeated what I discussed in my notes, but it was the calculation at the time, key.Right.So what we got at the time is a pension plan and we were asked to indicate how it would be calculated for the full year as of May 31, 2001.So this is the year we are looking at. So you have some numbers for this year and last year for May 2000, and we have various other numbers in the question that we'll use as we discuss, but there's a bank answer about the team that we'll use and work through this answer together . So we Kate.This.But so just sharing team stuff. It's just a matter of the problem itself, just a few minutes and then we'll figure it out together. right.
So what we're going to do is, first of all, we're going to look at what's going on on the balance sheet side. The rule in the standard is that the market value model used for market value is the model used. So it has to tell you in the question that the market value of the asset is this number. The market value liability is this number. You must be informed of this, it will be because you are unable to do the problem. So looking at assets, okay, let's look at the beginning of the year. So at the beginning of the year, in terms of assets, first of all, we can see that first is 18,000, let's hope glasses and 1970, which is the asset value at the beginning of the year. Then it says on the second line that in May 2000, the value of the liability was 1.5 billion. So the assets at the beginning of the year and 1970, the liabilities at the beginning of the year are 1,500. Let's put it this way. Thanks. So at the beginning of the year, we had a surplus in the program, and all of those programs had a surplus of 70 by that time. At the end of the year, if we look at the corresponding numbers, the right column, assets are two 950, and then in the third row of the question, it says liabilities 2,000. It's just, actually, that's the problem. This is what it was like at the beginning of the year. We've got this position. We'll see what happens as we fill in the gaps, and then see what happens below in a few weeks. And then eventually, as you can see in my final answer. But then the extractor, the balance sheet or what is known internationally as a statement of positive position and extracts the profit and loss statement or what is known as a profit and loss statement internationally and this total record profit and loss statement is known internationally as a total statement. There are also six different terms in the balance sheet of International and.OK.So let's look at that in a little more detail as we're going to fill this in.
First, you do the boundaries, which is where the balance sheet was at the end of May 2001, but we're just going to do one, which brings up some of the numbers that I've entered, on 2 Works, but also includes an extra point. So, the pension plan assets at the end of the year, because we've gone down to 2A2950 at the bottom of the job and the pension plan liabilities for 2000 were both at 1,000,000. So, when I went down to the bottom at the end of 2001, at 9:50 there was A pension plan has a surplus, so it's the same as the 950 at the bottom of my job. But the only other thing that it mentions in the question that's relevant to this is you can see it on the bottom line of the question, right at the bottom of the screen, it says that the company expects deferred taxes to be incurred ostensibly in the plan, the corporate tax rate is 30%.
Mohammed al-Masri (2110728) attended the meeting
Richard Dunstan 38:36 So before we encounter the deferred tax liability on the cash flow statement, we have already encountered the deferred tax liability , which is a more complex type of tax liability.
This is very much a long-term tax liability that does arise in certain transactions and in certain balance sheets and pension plans. But the reasons for its emergence extend far beyond the scope of modules. They do appear for quite complex reasons. Deferred tax liability, that's it, I think that's the only question in pensions that mentions different taxes, it's not in the other questions, but all you have to do is follow what it says and the question. So deferred tax is just a more complex long-term tax liability, but it illustrates what to do in this question, the circuits in the plan will have a deferred tax liability as an absolute percentage. So we're going to do that and put it in the answer in the deferred tax liability application, 30%, and if we take 30% of 9:50, that's me. Let's go back to my answer of 30% 9,5285. This brings it down to because it's 5. it's, it's. good. This is the net assets of the pension plan.
So it's just 9:50 that we have and then the bottom, like it says in the question, just take 30%. This way 665 will go. My last thoughts were of her. we are coming. We've done our balance sheet work. This is how pension plans appear on the balance sheet. We have a net pension plan with assets of 665. Right, in order to look at the income statement side of things, then we'll do the work as well. It's been working for two. I have opened and closed positions, and as I said to you, erroneous income and expenses are caused by changes in assets and liabilities. So if we put the different changes in the middle, they might be cached on the statement, but you look at revenue expense, you're not cash flow, then we're going to see different reasons why pension plan assets are close. In this case, it starts at 470,000,000 and ends at 9:50, and you must be told in the question how it trended over the year. As we'll see later, all you have to do is decide whether it's plastic or cons. Let's see what it tells us in the question. So it says that the pension plan that we noted during the year will improve benefits, etc., etc., OK. So it says that the actuarial liability for prior employee services increased by $25 million, and that's our past cost of services. All those I mentioned. So people who used to work for us lived for another year, so they were entitled to another year of pension benefits. So that increases the pension liability, the obligation, but $25 million, so it tells you that the past service cost was $25 million. So this is that. Service used to cost $25, and all you had to do was decide if it was a plus or a minus. Therefore, it clearly states in the question the increased liability of pension schemes. So at the beginning and at the end, we have an asset, like this might be another question, you have a liability in a pension plan, the liability, you have to look at whether you're looking at net plan assets or net structure. So in this case we have to take net pension plan assets. Obviously, if liabilities increase, past service costs will increase, which will reduce our assets. So anything that increases the liability side obviously decreases our net worth. But that's enough. So that's one of the sports out there. But back to the question. It then said the actuarial liability increased by $70 million due to employee services in the current period. This is called current cost of service. So people who currently work for us work for another year, for a total of one more year of pension benefits. Therefore, the current cost of service is another change during the year. So let's put that in. Again, for the same reason, there are among us. So it says it's an increase in responsibility. So we've taken on extra responsibility because these guys have been working for us for a year now. So past servicing costs and current servicing costs, they're both adding to the liability element, so they're decreasing in our net assets, right. What next tells us about the 60 million contribution the company paid to the program during this period? This is the employer's contribution. Contributions to the plan. It would be a +60. You would go into the plan investment bank account, or somewhere else where they invest the 60 million. Therefore, money going into the plan includes money going into the plan, which will increase the asset element. So that's plus 60, right? what else? We are told that the company expects pension plan assets to be 295. This should be 95 as it will increase the acid tournament and the expected return on assets will increase the asset element.
So this will be a +295 and then there is the next one. The interest on the pension liability is 230. This will be subtracted as any interest on the liability will add to the liability element. So this will be a -, 230.So all you do with this little thing is read carefully. Different moves over the year and different moves over the year must be given to you in the question. All that can be decided is where the minus sign is. And then there's one that always comes up as a balancing number. So, aria. I'll put the proceeds or. The loss there. Time does and determines which of the two reasons SEC.So this one. It is the final balance. Okay, so if you figure out the balance and you figure out 50 points? Adding 450 is the balance number we need to bring it down to 9:50. So because initially. We are looking at plan assets. It's +450, so it increases equity. Again, we're going to put natural play here. So because it's a platform, if they're looking for assets in the first place, that's the tracking game. So that also gets the job done. These are what different movies do here, or what we're going to do now is show where they are in a fight scene. Okay, as mentioned in the comments, there are three elements: Past Service Cost and Monetary Cost are the regular elements. Those things that are forecasted, they tend to be percentages of payroll payroll. Therefore, both past service costs and current service costs go into the operating portion of the income statement.
This is 25 buses, 70. This is 2017, when I get 25 and 70, the operating division, profit and loss, you will have enough instance age and salary will be specific overhead expenses. So in wages and salaries, we have a cost of 95 against wages. This is the first of our three components. Of our three components, the contributions we'll return to next are the two whippers. So expected return on assets is like an interest receivable number, maybe dividends received, but it's interest received or dividends received, not interest on liabilities. Apparently, it's more than just coping. So of these two numbers, 295 is obviously greater than 2:30, so you have a net number of 65. If you wish, you can introduce them as two separate lines. My net interest is 65, but if you eval the interest 295, the interest payable 230 Kim is the same thing, right? So you don't have to disappoint them. You can assume there are two separate lines. You have my problems. So you have the past service cost and the current service cost in the operational element. You have the income and the interest on assets and liabilities, in the financial part of the income statement and then the other performance statement is the income statement for token recognition and that's how the game goes, like a server, the valuation of the property doesn't Appear in profit, Moscow itself. It appears in the second performance statement and then also as a valuation allowance at the bottom of the balance sheet. With the actuarial gain, we have a +450.At who's there? This actually completes the answer. So there are no complex calculations really related to pension plan accounting and this will be one of the shorter questions on the exam. So there is no complete, no complicated calculation scheme. Although technically a conceptually more difficult area, pension planning is actually the way it is calculated, especially when two people do a few relatively simple questions. We don't need to do lengthy work. You know, we did 2 short stints. I've done a clear presentation, so obviously if a question comes up in the exam and you're asked to explain where it is, end your answer with a clear presentation. So I can clearly see what's on the balance sheet, the loss is recognized in the income statement. So yes, doing it later in the exact same way gives a clear demonstration of the sorting and you know the final answer. But as we can see, when we do it a few more times, any question about a pension plan is going to be relatively similar because it's always going to be the same type of transaction. You'll have a passerby to discuss. You will have the current cost of service. You will be interested in assets and you will be interested in liabilities. There are only one or two, and you just go back and the SEC understands how different sports operate throughout the year. This is most of them. As we'll see with several others, one or two more may arise. So the choices made by different actions, yes. These are the ones you'll see mostly. There are one or two more. While we're looking at a couple of other issues, there's definitely at least two more that could possibly make their way into it. But war and that underlying issue, it's the same thing. Just ask the workers. Do it little by little. Put on a show. Oh yes. Yes, yes, yes. As with any topic on the exam, always show how you worked, and you get credit for that approach. For example, you just presented your final answer. For example, if you have, I don't know there's a 765 in there, obviously the number is wrong, but unless I can see how you got your 765, I have to give you a 0. But if I can see oh. He got half of it right and half of it wrong. If it's four months, you might get 2 points on the fourth example. So, yes, show as much as you can about how you worked, ask as many questions as you can, and then if you make a few mistakes along the way, you'll get points for your approach. No, the only thing I didn't mention was the contribution of 60 to the scheme, which doesn't appear anywhere in my final summary because it goes directly to the bank, so it doesn't appear on the balance sheet, profit and loss statement or The report refers to game losses. Contributions into the scheme are paid directly to the bank and any investment opportunities presented thereto or by them are then made. But this is all about pension plans. So we're going to do a lot of other things today and tomorrow and actually see some small differences between some of them. But essentially, they are all very similar and have the exact same types of layouts that we can use. All right. So let's close the first one. And the question, the blank one question, like two, and then we'll find the question. Let me share, that's all. That's in the shadows on you. It's happening, question.Uh.Is it a shorter process, but we can handle it the same way. You have all kinds of information about that pension plan and we were asked, uh, it said the following details related to the plan up to November of this year 2002.So we were accounting for that particular financial year. You 2002. Example 2. Yes.
So again, I did a job there that was very similar to the first one we did. I got my final answer there, which is the same way we approached the first question. Do you have something in yourself? First, to set the opening and closing positions, first, as we did, and then see what trends we have had over the course of the year and whether they are still downsides. But in this case, the opposite is true. You have a lot and net planning responsibilities and not so where are the pros and cons? Yeah, take a moment and try to do one for yourself and then we'll summarize where they can go. What did you ask? If I could bring that lady to the office. "So said. So, at the end of the year, the following details relate to the plan, ridiculously through the 2002 membership, which is the end of the year. So the top two lines, the present value of the debt, the liabilities are 130. The fair value market value of the assets is 125. So liabilities are 130, assets are 125 but minus 5. This jar let's subtract yes. Yeah, so. Pension plan liabilities net, and at the end of the year we get net debt 5. Yeah, but at the beginning of the year it's 12 What is the month? Oh, one, we have until the end of November 02.So what will be the beginning of the year? The reason for this question anyone can discover carefully, but it will be the beginning of the year. According to what it says in the first line .You know, just started 0 because it was just because.Yeah.Yeah.So it didn't exist at the beginning of the year. It just started in the middle of the year, even though obviously it hasn't started yet, so it's just finding it here because.
OK.So This is what we got at the beginning. At the end of the year, if you bring in what happened during the year, let's go back to This question, there is nothing. Yes, there are no different movements in this case, so they are the same as the previous one, and in some of the later questions we will do, there will be some additional potential movements, but not in in this movement. So, try to bring them in yourself. Obviously, these numbers are problematic. You just got it. And then deciding for yourself whether they are plus or minus is something to remember. And then in this case, We're dealing with another liability and we're going to do it on acid. So how's that going? So bring it south. Once you've done that we can move on to the final dance and the actuarial giggle loss will be once again Balancing the numbers. Those headlines you need so you sort of what we had in the previous question. That is, this one has no past cost of services. Found that. You know what I'm evaluating contract law. Is the homework and Exam, or just two examples? Just check it out. Like, I just believe in the office thing in Guari. Okay, so if we put stuff in, then it should be those. So the employer contribution will increase the assets element, so it would be a good thing because in this particular case, I said it was very much a question from question to another, and actually the way I answered it was, you can do it both ways. I put the onus on As a minus sign. I don't have to do that because I have the word responsibility in it, so I can put it in there instead of putting a minus sign in front of it because I have the word responsibility in it. But if I Putting the liabilities in is five, then the liabilities will be positive. Therefore, the assets will be negative because it will reduce the liabilities.
So you just need to be careful with this flag. So in this case, because anything that has to do with debt, I would put a minus sign in front of it. Obviously, anything acid-related is a plus, so you have to be careful with the science. Therefore, the employer's contribution will increase the asset position. This is a +100 and the expected return on assets will also increase the asset element. This will be +10. The interest paid on the liability will increase the liability bit. This will be -, 20, and then the current cost of service. For those who currently work for us, this is an additional responsibility. They work for another year, so that will increase the speed of responsibility. So if we put these numbers in front of them, then we actually get an actuarial game. I think that's it. Okay, so the last thing we need to do is just like we did before, we can put them here. Therefore, we get the net pension plan liability minus 5. In this case, what are the administrative expenses? We're just current service costs. That's 110. Yeah, it doesn't matter if you take the simple activity of the subtraction because it comes down as an expense and then we get the interest payable. But we have interest payable minus 20 and assets minus 10. For the net interest payable, subtract the 10 I said earlier. Or. As, if you want, you can separate them as two lines, that's okay. So you charge interest and then just pay 12110 and then the actual air play. what is that? It 15.In that go in. This is the last one. To get to what similar questions are, they are all very similar, but some of them have a few extra questions in this regard. We'll see. That's it, until 2.OK.So let me close that one. Would you like to see Sweden.Student.So samples? Okay, here's an example. Three again, this is the shortest question. We didn't do any of that this morning, the hand-to-hand issues, but I think everything will be done tomorrow. Ah, that's the test paper version, you see it's not too similar, just the other two bits and pieces, most of the questions people had in the past are exactly the same as what we do today, but that's just. Yeah, um, and this one has a. Well, no. This one actually has two other different moves that we didn't see. Um, but this is just a short multiple choice question. So we are looking at the year ended August 1, 2000 and X3 2023.So we will be looking at the year ended August 31, 2000 and What is the actuarial gain loss? So you don't need to do a complete P&L on the server, on the balance sheet, on the P&L. We are not asked to do this, but we are asked to do it. was asked to resolve. Actuarial gain loss. OK, so you got the same type of work in my blank answer. You yourself are there again. So just insert numbers at the beginning to illustrate the movement during the year. There are several actions doing this.
There is one in particular that requires more thought. Neither problem exists. There is another one. There are two issues, two issues, two potential movements that are not present in the other two issues. One of them is easy to decide if the cluster minus we have to go to us. This is entering the numbers for yourself. So I wrote the narrative on the blackboard. So that's basically what we're trying to find. It's just a multiple choice question, but it asks us to find it. So these are their signs, you need.Right.So look at it, I put some numbers in all the opening and closing numbers and they mentioned what I wrote myself, the opening and closing liabilities were 35 million and 40 million respectively. So 35 points at the beginning and then 40 points at the end. By the way, I put in some others. Therefore, we get the expected return on assets. So this will increase the asset position. So it's going to be a +60. You, we have a current service cost that we've seen before, so it's an additional responsibility for people who currently work for us.
So this will lease the liability bit, so negative 45, because again, I'm putting the liability first. Pension contributions, the employer's contribution to the scheme will increase the asset level. So, plus 14 differences that we haven't seen in previous questions. We have other benefits, we are close to the bottom. Therefore, the entity provides additional benefits to existing pensioners, which vest immediately and have a present value of 10 million. So that's an added benefit, that's an added responsibility. We have to pay these people real benefits. So it will be an additional responsibility. This will add a bit of responsibility, but is the final step. So that one we haven't seen before, but I think it's pretty simple to decide where this plus and minus value is and it's one that we haven't seen before, but it's hard to decide, but it's the plus and minus value that I put There and the entanglement of discounts. So let's see what it says about it in the question. It just means that the discounted closing of pension liabilities is 30 million, right? Therefore, we encountered discounts in several different themes. I know you encountered provisions at level 5, you make provisions for future costs, and one example we did on the cash flow statement was the previous week there was a long-term provision that needed to be discounted. But when we did the impairment topic last week, we also encountered and discounted the value-in-use because of the discounted value of future cash flows generated by optical glasses. So, yes, we have discounts, but it's also about pensions. So we did say before that pension plan obligations or provision of long-term liabilities, the benefits of which are typically paid out quite a few years into the future, depending on how long people live. Therefore, this should be discounted back to present value. But over time, the discounts are being lifted. So think about three years. Let's take regulations as an example. So if you prepare for future costs, for example, you might prepare for 30 million in future costs, for example, because a company damages the environment, I don't know, it might be like an oil rig. When an oil rig is completed, its service life. It must be demolished. Then correct the damage to the environment. So we stipulate that 30 million will be paid in 10 years, OK.So if you are discounting, for example, the interest rate is 10%, you divide your 30 million by 1.110 times. This would be how you actually do the discounting and use a mathematical formula and only one person ends up doing it. So if you prepare the cost payable in 10 years, you would take some value and divide it by 1.110 times. This will be done early in the year as this will be last year's regulations. So, at the beginning of the year, you provide what you will pay over the next 10 years. At the end of the year, it offered them the fee, which is now due over the next nine years. So you just divide that 30 million by 1.19 times instead of 10 times, and that's what's called, the discount gradually increases as you progress year by year. You provide 1,098,765 etc. which are payable over the next few years. So you divide them by 1.19 times. You only get the discount for the last 9 years, not 10 years. So when the discounts are unlocked, that means liabilities actually increase because you divide them by 1.19x instead of 10x. Therefore, the liability increases as no wages are discounted. So the pension scheme liabilities that we provide may be that at the beginning of the year, the liabilities are discounted for 10 years. Now we're only discounting it for nine years. Therefore, as the discount is lifted, it increases the liability of the pension scheme. You can figure it out from the first principles I just tried to explain or remember it. Therefore, as the discount is lifted, the liability of the pension scheme increases. Oh, just go into it and then into the code in the collection. So, minus 30.So this is where it's hard to decide if it's a plus or a minus. As I said, if you understand the whole concept of discounting, you can solve it yourself from first principles, and hopefully you do, because you haven't a few times. Or you can remember. So as the discount is lifted, it increases the liability. So if we calculate the missing numbers, that's it. Subtract 20.So what we have. Taking out wordplay is an actuarial loss that leads to anything, just like I put a negative sign in front of a liability. So anything with a negative sign in front of it is related to the liability level, but actually the actuarial loss is 20.
This is the same thought process as the first one, but with two additional questions. They talked about the added benefits. I don't think it's hard to decide if it's a plus or minus, but the lifting of the discount is. But again, if you do this on the exam, it's like 5050, so you want to make sure which one it is. Take the guesswork out of it. It's going to be plus or minus, but yes, it's going to require more food. So in this case your actual area loss is negative 20. So the answer you actually see. That's actually the answer to what we need to do. The thing is, of all the things I do, that one job, let's do it now, to maintain integrity. You can see in the model so I just did it like you don't need to do that in the question but we're going to do it anyway because we've already done it with other questions and you can do that in my blank answer seen in. I have the format of our uh sheet income statement with suggested gains and losses. So it doesn't explicitly require us to do that in this particular issue, but we do it in all other issues. So, for the sake of completeness, we'll do that here. We get the net pension plan liabilities at the end of the year. Minus 40 you can put there. Right. Overhead costs are. In this case, the one that sees the current service cost is the one, not the past service cost. You have costs and expenses of 45 initial benefits. So that's an extra cost of 10, and with the discount lifted, it's actually worth doing just to highlight where it's going. Again, it was in last year's regulations. So when you put discounts on the chain, the whole concept of discounts is like a functional effect.
It takes into account the time value of money and the fact that money, materials and values persist through inflation. So the whole point of discounting is a financial effect. Therefore, when a discount is not what it refers to, it becomes a financial cost. So the release of the discount will go to finance costs, I'll have the interest payable in the income statement and I'll put the other two like overhead and fringe benefits. I put the minus sign in front, just to be consistent, but the minus sign is also put in front of these, they don't have to do that because it already has the word expense. Then the actuarial loss has to have its 20. We can put it in another performance statement to suggest analysis. Look, you don't have to do this for this particular problem, but it's worth it. Just a mess, especially maybe just. Show where these two expensive actual records are, you know. Where is the time spent? good. So, here are three questions about pension plans. As you can see, each of the three is relatively similar. Definitely one has a few extra questions on wood, the other two, but the whole approach to this question and the way the answers are given, is relatively similar to all three. Hopefully not, it may seem complicated, just by reading the initial comments, it's a conceptually more complex area of pension planning, but when you actually apply it to the input numbers problem, I think once people do a few This problem will not appear in . Is this what you thought when you left these two nodes? um.So these are not the paper questions of the past, but yes, very similar to the questions of tomorrow. So we're going to continue with this particular topic tomorrow and there are some other questions on Moodle that are past exam questions. So we'll see if there's any difference. They tend to be very similar. They're probably a little longer than the questions we're doing today (exam questions), but they're not that much longer, probably just a couple of extra questions in there. We'll see. good. But anyway, we're going to end this morning with this module, so let me end this module. Stop coding.