Question

Pension as post retirement employee benefits is difficult to recognize and measure but the standards required to represented in the financial statements, explain pension, the difficulty that faced pension measured and how should we recognize and represent the pension in the financial statements?

Answer 1

Pension:

Pesnion is a sum into which money is added during employees employment years, and from which payments are withdrawn to support person retirement

Employees do not have the control of investment decision with a pension Plan, and they do not assume the investment risks. The contribution is made by employer and employee , mostly both to managed by investment professional. All private pesions are contolled by PBGC (Pension benifit guarentee corporation), when employer pays regular premiums employee pension is protected

Recognition of Pension in Financial statements:

Pension asset on balance sheet is pool of assets at balance sheet date.

while determining pension expense in pension accounting

1. Current service costs : Increase in present value of pension obligation that results from employee current service

2 Past service costs : These are costs from plan reductions, plan amendments

3. Interest cost : cost that increases with passgae of time

1AS 26 explains the accounting and reporting by retirment benefit Plans:

Objective is to measue and disclose the reports of retirement plans, some Key definitions covered

a) Retirement Benifit Plan: Employer provides benfits to employees after they retire

b) Defined contribution Plan: Benifits to employees are based on amount of funds contributed to plan plus investment earings

c) Defined benefit plan : Employee recieves benifit based on earnings of employee