chapter 14 - employee benefits

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• There are two objectives for IFRS2 Share based payments - which? To prescribe the accounting when payments are made, either in the form of shares/options, or cash dependent on the company share price
• Which of the plans will create both a liability in the balance sheet and a cost in the income statement in the company? Defined benefit plans, where the company bears the risk, will create both
• In what way will the current market interest rate level impact the calculation of the pension obligation? The estimates of future obligations are discounted using the market interest rate
• Name two factors that are important in calculating the defined benefit obligation. Employee mortality, future salary increases
• The total cost for pensions during the period consists of two items (unless the employees have contributed) - which? The present value of current services cost for the period and the interest cost
• What is a vesting condition and how does it affect the accounting? The conditions the employee must satisfy to receive the equity instruments
• How is the accounting affected if the share-based payments are settled in cash? The company should measure this liability at fair value, both at the grant date and at each reporting period
• What is the grant date and why is it important for the accounting when equity instruments are involved? The date when the fair value of equity instruments are measured and the value is fixed from that date
• Which are the two types of pension plans and who bears the risk? Defined benefit and the company bears the risk
• What is a defined benefit obligation and how is it accounted for? Estimates must be made of the accumulated benefits which employees have earned (obligation) and the extra amount they have earned during the current period

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