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9B. Defined benefit schemes - Coggle Diagram
9B. Defined benefit schemes
ACTUARY: will be used to give lots of estimate for long term employee benefit
Definition
Legal or construction obligation to pay out a guaranteed amount of retirement benefit
Salary at retirement x number of years worked / xx years
Entity guarantees a particular level of pension benefit to its employees upon retirement
If the fund does not have sufficient funds then the company has to find additional funds
Net pension liability / (asset)
Obligation > Assets -> deficit which is a liability in SFP
Obligation < Assets -> surplus which is asset in SFP
(refunds or reduced contribution in the future)
Asset ceiling
PV of any economic benefits from the plan or
reductions in future contributions to the plan
Capped
Surplus in the defined benefit plan
Asset ceiling
Lower of:
Accounting treatment
Benefits paid (+ & -) No impact
At reporting date
Contributions (+) Cash paid SFP
Service cost (-) charge to SPL
Remeasurement & record OCI (DR OCI & CR pension deficit/surplus)
Unwinding of discount (- & +) charge/income to SPL
Closing balance per actuary
B/F
Plan obligation as PV (-) & Plan asset at FV (+)