Employee Benefits Simplified Summary 2012

Employee Benefits -all forms of consideration given by an entity in exchange for services rendered by employees.

J/E: Benefit Expense xx Cash* xx Prepaid/Accrued Benefit Cost** xx

(*) – Cash = Contribution to the fund
(**) – Credited if Accrued (Underfunded); Debited if Prepaid (Overfunded) Underfunded – Expense is more than Cash contributed Overfunded – Cash contributed is more that expense incurred

Benefit Expense:
Current Service Cost xx
Add: Interest Cost xx
Past Service Cost xx
Total xx
Less: Expected Return on Plant Assets xx
Benefit Expense xx

Fair Value of Plan Assets (FVPA):
FVPA Beginning xx
Add: Contribution to the fund xx Actual Return on Plant Assets xx
Total xx
Less: Benefits Paid xx
FVPA Ending xx

Projected Benefit Obligation (PBO):
PBO Beginning xx
Add: Current Service Cost xx Interest Cost* xx Past Service Cost** xx
Total xx
Less: Benefits Paid xx
PBO Ending xx

(*) – Interest Cost = (PBO Beg x Interest Rate)
(**) – “Past Service Cost is now vested immediately and doesn’t need to be deferred (2012)” – Sir Red

Prepaid/Accrued Benefit Cost:
DEBITS: FVPA End xx
Add: Actuarial Loss* xx
Total xx
Less: CREDITS: PBO End xx Actuarial Gain** xx xx
Prepaid/Accrued Benefit Cost xx
(*) – Actuarial Loss: If Expected return is greater than Actual or if Expected obligation is lower than Actual.
Ex:
FVPA Actual 260,000
Less: FVPA Expected (300,000)
Actuarial Loss (40,000)

PBO Actual 150,000
Less: PBO Expected (100,000)
Actuarial Loss 50,000

IF ACTUAL AND EXPECTED AMOUNTS ARE NOT GIVEN, ACTUARIAL LOSSES ARE COMPUTED AS FOLLOWS:
If PBO increased or FVPA decreased.
PBO beg xx
Less: PBO end xx
Negative answer (xx)- PBO increased (LOSS)

Or
FVPA beg xx
Less: FVPA end xx
Positive answer xx – FVPA decreased (LOSS)

(**) – Actuarial Gain:
If Expected return is lesser than Actual or if