## Calculation of the actuarial gain and losses, Financial Accounting

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Calculation of the actuarial gain/losses in year to 31 December 2010

 FV of plan assets PV of plan liabilities \$000 \$000 Opening balance 2,600 2,900 Service cost 450 Interest cost (8% x \$2,900,000) 232 Expected return (5% x \$2,600,000) 130 Past service cost 90 Benefits paid (240) (240) Contributions 730 3,220 3,432 Actuarial gain on assets 180 Actuarial loss on liabilities 68 Closing balance 3,400 3,500

(b) SARs are an example of a cash-settled share-based transaction and, in accordance with IFRS 2 Share-based payments, are primarily measured at fair worth at the grant date and consequently premeasured to fair value at each year-end. The liability is premeasured and any difference is charged to the income statement as an expense. (This description is not a required part of the answer but is included to aid understanding.)

2009

Eligible employees (300-32-35) = 233

Equivalent cost of SARs = 233 employees x 1,000 rights x FV\$8 = \$1,864,000

Allocate over 3 year vesting period \$1,864,000/3 = \$621,333 equivalent charge to the income statement in the first year.

2010

Eligible employees (300-32-28-10) = 230

Equivalent cost of SARs = 230 employees x 1,000 rights x FV\$12 = \$2,760,000

Cumulative amount to be recognised as a liability = \$2,760,000 x 2/3 years = \$1,840,000

Less amount previously recognised = \$1,840,000-621,333 = \$1,218,667

The expense will be recorded as:

Dr staff costs \$1,218,667

Cr liability \$1,218,667

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