Page 4 - 12. COMPILER QB - INDAS 19

value of the defined benefit obligation is therefore, increased by Rs 80 million. Given below is the composition

of this amount:
Employees with more than 5 years’ of service at 1st April, 2015 Rs 60 million
Employees with less than 5 years’ of service at 1st April, 2015 Rs 20 million

The employees in the second category have completed average 2 and half years of service. Hence, they need
to complete another two and half year of service until vesting.

Comment on the treatment of Rs 80 million of the defined benefit obligation in the financial statements
both as per AS 15 and Ind AS 19.

Solution

 Under AS 15, a past service cost of Rs60 million needs to be recognized immediately, as those benefits are

already vested. The remaining Rs20 million cost is recognized on a straight-line basis over the vesting
period, i.e., period to two and half years commencing from 1st April, 2015.

 Under Ind AS 19, the entire past service cost of Rs80 million needs to be recognized and charged in profit

or loss immediately. ABC Ltd. cannot defer any part of this cost.

Q3 (May 21)

At 1 April, 20X0, the fair value of the Plan Assets was Rs.10,00,000. The Plan paid benefits of Rs.1,90,000 and
received contributions of Rs. 4,90,000 on 30 September, 20X0. The company computes the Fair Value of Plan
Assets to be Rs.15,00,000 as on 31 March, 20X1 and the Present Value of the Defined Benefit Obligation to

amount to Rs.14,79,200 on the same date. Actuarial losses on defined benefit obligation were Rs.6,000.
Compounding happens half-yearly. The normal interest rate for 6 months period is 10% per annum, while the
effective interest rate for 12 months period is based on the following data:
At 1 April, 20X0, the company made the following estimates based on market prices at that date:
Particulars %

Interest and Dividend Income, after tax payable by the fund 9.25

Add: Realized and Unrealized Gains on Plan Assets (after tax) 2.00
Less: Administration Costs (1.00)
Expected Rate of Return 10.25

Determine actual return and expected return on plan asset. Also compute amount to be recognized in ‘Other
Comprehensive Income’ in this case.
Solution

Computation of Expected Return on Plan Assets
Particulars Rs.
Return on Rs 10,00,000 for 20X0-20X1 at 10.25% =10,00,000 x 10.25% 1,02,500

Add: Return on Rs.3,00,000 for 6 months at 10% Normal Rate = [3,00,000(Inflow
Rs. 4,90,000 less Payment Rs. 1,90,000) x 10% 6/12] 15,000
Expected Return on Plan Assets 1,15,500

12. 3