Question 12Under defined benefit plan:Answer :The employees’ benefits are unknown. Actuarial valuation is unnecessary in accounting for the plan. The plan asset and retirement benefit obligation belong to the employer. The employer is not legally bound by the ultimate amount to be payable to the retiring employees.
Question
Question 12Under defined benefit plan:Answer :The employees’ benefits are unknown. Actuarial valuation is unnecessary in accounting for the plan. The plan asset and retirement benefit obligation belong to the employer. The employer is not legally bound by the ultimate amount to be payable to the retiring employees.
Solution
Under a defined benefit plan:
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The employees' benefits are not unknown. In fact, they are determined by a formula that usually takes into account factors such as salary history and duration of employment.
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Actuarial valuation is necessary in accounting for the plan. This is because the employer needs to know how much to contribute to the plan each year to ensure that there will be enough funds to pay the promised benefits.
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The plan assets and retirement benefit obligation do not belong to the employer. Instead, they are held in a trust for the benefit of the employees.
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The employer is legally bound by the ultimate amount to be payable to the retiring employees. This is because the employer has made a promise to the employees to provide a certain level of benefits in retirement.
Similar Questions
Which statement is incorrect concerning the recognition and measurement of defined benefit plan?*1 pointActuarial assumptions are required to measure the obligation and expense and there is possibility of actuarial gains and losses.The obligation is measured on a discounted basis.The expense recognized for defined benefit plan is not necessarily equal to the amount of contribution due the period.None of the foregoing
Question 14Under defined contribution plan:Answer :The employer’s contribution is unknown. The benefits payable to the retiring employees is unknown. The amount of benefits to be received by the retiring employees depends on the amounts originally contributed plus income from investments accumulated in the fund. The benefits of gains or risks of losses invested under the fund are borne by the employees.
Question 4Palam Bhd has defined benefit plan for its employees. On 31 December 20X9, the present value of defined benefit obligation and the fair value of plan assets were RM575,000 and RM540,400 respectively. The actuarial loss calculated from the present value of obligation was RM128,500. Calculate the net retirement benefits for the year ended 31 December 20X9:Answer : Net retirement benefit asset of RM34,600 Net retirement benefit liability of RM34,600 Net retirement benefit asset of RM136,100 Net retirement benefit liability of RM93,900
The report of defined benefit plan shall contain: I. A statement showing net assets available for benefits, the present value of promised benefit and the resulting excess or deficit. II. A statement of net assets available for benefits including a note disclosing the present value of proised benefits *1 pointI onlyII onlyboth I & IIeither I & II
Question 5On 31 December 20X2, the present value of defined benefit obligation and fair value of defined benefit asset are RM700 million and RM750 million respectively. The future economic benefit of the plan asset is RM65 million. The retirement benefit at 31 December 20X2 isAnswer :Net defined obligation of RM50 million Net defined asset of RM50 million Net defined obligation of RM65 million Net defined asset of RM65 million
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