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 Expensexx
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 Costxx
Add:Interest Costxx
Past Service Costxx
Totalxx
Less:Expected Return on Plant Assetsxx
Benefit Expensexx

Fair Value of Plan Assets (FVPA):
FVPA Beginningxx
Add: Contribution to the fundxx
Actual Return on Plant Assetsxx
Totalxx
Less: Benefits Paidxx
FVPA Endingxx

Projected Benefit Obligation (PBO):
PBO Beginningxx
Add: Current Service Costxx
Interest Cost*xx
Past Service Cost**xx
Totalxx
Less: Benefits Paidxx
PBO Endingxx

(*) – 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 Endxx
Add: Actuarial Loss*xx
Totalxx
Less: CREDITS: PBO Endxx
Actuarial Gain**xxxx
Prepaid/Accrued Benefit Costxx
(*) – 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 begxx
Less: PBO endxx
Negative answer(xx)- PBO increased (LOSS)

Or
FVPA begxx
Less: FVPA endxx
Positive answerxx – FVPA decreased (LOSS)

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