Calculation of the actuarial gain and losses, Financial Accounting

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

FV of plan assets

PV of plan liabilities



Opening balance



Service cost


Interest cost (8% x $2,900,000)


Expected return (5% x $2,600,000)


Past service cost


Benefits paid







Actuarial gain on assets


Actuarial loss on liabilities


Closing balance




(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.)


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.


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

Posted Date: 5/29/2013 4:00:42 AM | Location : United States

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