Q1. Critically discuss the approaches adopted in revised IAS 19 (IAS 19R),Employee Benefitsin dealing with controversial issues in accounting for employer sponsored defined benefit pension plans. Q2....

Q1. Critically discuss the approaches adopted in revised IAS 19 (IAS 19R),Employee Benefitsin dealing with controversial issues in accounting for employer sponsored defined benefit pension plans.

Q2. FWBplcoperates a defined benefit pension plan for itsemployees. The directors of FWBplchave adopted the revised provisions of IAS 19 (R) Employee Benefits.
At 1 April 2013 the fair value of the pension plan assets was £2,700,000 and the present value of the pension plan obligations was £3,000,000.
The service cost for the year ended 31 March 2014 was £650,000. On 1 April 2013 the pension plan was amended to offer additional benefits to members resulting in past service costs of £200,000. The relevant discount rate for the year ended 31 March 2014 was estimated at 5% and FWBplcpaid £950,000 in contributions to the plan. The pension plan paid £320,000 to retiredmembersin the year to 31 March 2014.
At 31 March 2014 the fair value of the pension plan assets was £3,600,000 and the present value of the pension plan obligations was £3,800,000.
REQUIRED:

a) Prepare, in accordance with IAS 19 (revised)Employee Benefits, the pension extracts in the income statement and statement of financial position for the year ended 31 March 2014.

b) Calculatethe amounts that will be included in the other comprehensive income for the year ended 31 March 2014, and pension funded status for the year 2013 and 2014.

Q3.Netteplcpurchases a machine for £800 on 1 January 20X5. It has an expected useful life of four years and an expected residual value of £253.Netteplcuses straight-line depreciation. Capital allowances for tax purposes are 25% reducing balance and the corporation tax rate is 33%.

REQUIRED:

a) Preparethe income statement extracts (relating to deferred taxcharges or credits);

b) Preparebalance sheet extracts (relating to deferred tax provisions) for the years ended 31 December 20X5 to 20X8, using the balance sheet approach consistent with IAS
12.

Q4.Explain IAS 12“Income tax”requirements relating to the accounting treatment ofdeferred tax. Critically discuss why it is considered necessary to provide for deferred tax and briefly outline the principles of accounting for deferred tax under IAS 12, Income Tax.

Q5. Explain and discuss the key accounting issues in determining the method of accounting for defined benefit pension plans.

Q6. JW operates a defined benefit pension plan for its employees. At 1 January 2013 the fair value of the pension plan assets was $3,700,000 and the present value of the pension plan liabilities was $3,900,000. The actuary estimated that the service cost for the year to 31 December 2013 was $1,100,000.
The pension plan paid $340,000 to retired members and JW paid $760,000 in contributions to the pension plan in the year to 31 December 2013. The actuary estimated that the relevant discount rate for the year to 31 December 2013 was 5%. At 31 December 2013, the fair value of the pension plan assets was $4,400,000 and the present value of the pension plan liabilities was $4,700,000.

REQUIRED

In accordance withrevised IAS 19 Employee Benefits:

(i) Calculatethe expense that will be charged to JW’s profit for the year ended 31 December 2013 in respect of this pension plan.

(ii) Calculatethe net actuarial gain or loss on pension plan assets and liabilities that will be included in JW’s other comprehensive income for the year ended 31 December 2013.Your answer should clearly state whether it is a net gain or a net loss.

Q7. The following table provides actuarial assumptions disclosed by three automobile companies with defined benefit plans in the United States in 20x1.

REQUIRED

Compare these rates to those used by the average of 88 companies in the same industry and discuss which company is the most conservative in its estimates, and which is the most aggressive. Give your reasons.